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 Fake RAK IPO seekers may face SEC action

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PostSubject: Fake RAK IPO seekers may face SEC action   Mon Jun 07, 2010 12:24 am

Sarwar A Chowdhury

The stockmarket regulator is likely to take action against more than 46,000 fake and faulty applications that sought primary shares of RAK Ceramics, a Bangladesh-UAE joint venture.

The company itself detected the false and flawed applications before its IPO lottery and submitted a list of those to the Securities and Exchange Commission recently, officials said.

The lottery was held on May 24. More than 3.45 crore ordinary shares were allocated at the public offer price of Tk 48, with Tk 10 in face value.

SEC Chairman Ziaul Haque Khondker said: "We came to know about the faulty applications. We'll look into the matter at the commission's next meeting."

Khondker hinted at the cancellation of the applications having wrong information, or being non-compliant with rules and forfeiture of a portion of the money deposited along with these applications.

He, however, said the applicants committing minor mistakes will not face any action.

An official of the commission assumed that the amount to be forfeited would be no less than Tk 44 crore.

In some previous cases, the SEC had forfeited 15 percent of the IPO proceeds for faulty applications.

RAK Ceramics has raised Tk 165.64 crore from the public through IPO. But the company has received IPO applications worth Tk 1,808 crore, more than 15 times oversubscribed.

The tiles maker is the first company that offered primary shares using the book building method, a modern pricing mechanism for initial public offering.

Around 5,392 applicants in the non-resident Bangladeshis quota are learnt to have submitted more than one application each, using the same bank account number.

As per rules, a bank account number can be used only for a single IPO application.

Besides, some local and NRBs submitted 739 applications violating a clause of IPO rules. The clause says more than three applications could not be submitted using a single BO account and joint BO account numbers.

Around two years ago, the SEC unearthed an attempt of opening more than 2,000 BO (beneficiary owner's) accounts that used the same address.

BO account is needed for electronic share transaction as well as applying for an IPO.
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