Caught in IPO: Application of one person in the name of hundreds

On January 3, a person posted a status in the group that wrote ‘Nifra’s IPO 27 equals 1420’. There were a lot of people commenting on the status saying ‘we also got so many IPOs’.

The status of 1,420 IPOs of Infrastructure Bank (NEFRA) was deleted after 27 applications were filed. After the IPO distribution, such statuses have become common on social media. There are many such posts in Facebook groups related to market.

After the issuance of IPO by NIFRA, there is a wave of public towards the share market.  users have doubled since two months ago.

According to CDS and Clearing Limited, which keeps track of share transactions, the number of demat users has reached 3 million 41 lakh 698. With so many demat users, the stock market experts are skeptical that even four lakh transactions are not done daily.

Share analyst Prakash Tiwari says that one person has applied for thousands of IPOs. According to him, the same person has taken several photocopies of citizenship and opened several bank accounts and demat accounts to fill the IPO.

‘I have met people who fill in the names of 11 hundred people. There are so many to fill in the names of 50, 100, 200 people ‘, says Tiwari,’ All the accounts opened in this way have the signature of one person. ‘

Mekh Bahadur Thapa, chairman of the Nepal Merchant Bankers Association, says that some accounts are opened with the approval of the person concerned.

“Someone may have opened a with the citizenship of a close relative or even a senior citizen,” he said. “I don’t think anyone has discouraged this.” Merchant banks do not encourage such work as there will not be a large file when many demats are opened.

IPO in the name of another

A bank account is required first to fill an IPO. After having an account in any bank, a is opened.

You have to take the demat account opening form, fill in all the details and submit it to the bank. Opening a demat account requires a copy of citizenship and a photo, just like opening a bank account. Tiwari, a stock analyst, says that the citizenship and photo of the other are being used while opening both the accounts.

The amount sold for the shares comes to the bank account. Even if there is a bank account in another person’s name, the person who opens it withdraws money by keeping ‘access’. Tiwari says that it should be considered natural if the family members belong to the same family.

“Since shares can be filled from home, it is natural for family members to file IPOs in each other’s names,” he says.

Application also in the name of the deceased

It has been found that shares have been traded in the name of the deceased. An official of the Nepal Securities Board (NSB) said that the deceased had applied for IPO after looking at the details of a person who had come to transfer shares a few days ago.

The man had gone to a merchant bank asking to transfer the shares in the name of his deceased father. “The IPO was found to have been filed even a month after the death of his father,” said a board official. “The legitimacy of the IPO filed by the deceased has been questioned.”

The board has not been able to decide what to do with the IPO in the name of a person who is not in the world. Officials say it will take time to make a decision because of legal issues.

‘It could even be a criminal act’

As of mid-January last year, the number of bank accounts was 111,12,194.  was affected for a long time in between. But since then, the growth of bank accounts has not stopped. Gunakar Bhatt explains. According to him, 246.71 million bank accounts have been reached till mid-January last year.

Growing a bank account is not a bad thing, but it would be illegal for one person to use multiple accounts to fill up shares, he said. The concerned banks themselves should be very vigilant in this regard. Bhatt says, “If it is found during the supervision that a person has opened a bank account in the name of , action will be taken.”

According to him, opening a bank account only for IPO application is also illegal. He says that even criminal activities can take place in such a situation.

‘Corrupt money in someone else’s name account, may be keeping illegal earnings,’ the spokesman said. “Citizens with a lack of financial literacy are at risk of falling into such activities,” Bhatta said.

The Nepal Securities Board, the regulatory body for the market, is aware of this. Niraj Giri, executive director of the board, says that it cannot be said that there are no IPO applicants.

“There may be such demat accounts as you have to apply for an IPO by linking to a bank account, but there are not many of them,” he says.

How to discourage?

Share analyst Prakash Tiwari claims that the number of illegal IPO operators by opening bank and demat accounts in the name of others is around 50 percent. He says that the problem will be solved if the person concerned or his family is not allowed to fill it.

Bank accounts opened for IPO filing are inactive at other times. There is no transaction other than withholding money from those accounts and deducting money when there is no IPO.

Tiwari says that the problem will be solved by updating the KYC of the accounts which are operated only for IPO purposes. “If the KYC is to be filled by the person concerned, such accounts will be halved,” he said. “The Nation Bank and the board can do this easily.”

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