SEBI Issues Warning To ICICI Bank On ICICI Securities Delisting Outreach
In March, employees of the bank had urged shareholders of the broking unit to vote in favour of a proposal to delist it.
The Securities and Exchange Board of India issued an administrative warning to ICICI Bank Ltd. regarding the outreach by bank employees to influence votes for delisting equity shares of ICICI Securities Ltd., according to a regulatory filing on Thursday.
"There is no impact on the financial, operations or other activities of the bank," ICICI Bank informed exchanges.
In March, the private sector lender was criticised on social media by ICICI Securities shareholders for incessant calls from bank employees. They urged shareholders to vote in favour of a proposal to delist the brokerage house and merge it with its parent, ICICI Bank. It became an issue when the bank officials coerced them to share screenshots as proof, with some even showing up at shareholders' home addresses to obtain evidence.
Voting on the proposal commenced on March 22 and closed on March 26.
The bank owns 74.8% of ICICI Securities, and the proposal included a share swap ratio of two ICICI Bank shares for every three shares of ICICI Securities.
Amid the uproar, Quantum Mutual Fund called out the unfair swap ratio in the delisting of ICICI Securities. More than 100 minority shareholders filed a class action suit against the bank with the National Company Law Tribunal on May 10, and SEBI had been made a party to the suit.
SEBI, in its warning, said that the outreach programme undertaken by the bank was "inappropriate.".
"This has been viewed seriously. You (ICICI Bank) are, therefore, warned to be careful in the future and improve your compliance standards to avoid recurrence of such instances, failing which action may be initiated..." the market regulator said in its letter to the bank.
When SEBI inquired, ICICI Bank submitted responses that suggested that ICICI Securities had shared data of its shareholders with the bank at their request, and the outreach programme was undertaken to maximise participation in the voting process.
The outreach was done amid a "concerted campaign" on social media by some sophisticated shareholders of ICICI Securities against the delisting proposal, according to SEBI's letter citing the bank's response to the inquiry.
"It was observed that merely publishing of a few articles in media cannot be considered as a concerted campaign against the said scheme," SEBI said in its letter to the bank. "Moreover, neither your Bank nor I-Sec attempted to issue any advisory/communication to public, cautioning the shareholders not to get influenced by any such concerted campaign or unsolicited advice," it said.
Further, ICICI Bank had shared guidelines to its officials who were undertaking the outreach programme. While some shareholders were not aware of the e-voting process, the bank contacted them to "assist in e-voting process and help in resolution of technical issues". To this, SEBI said that it was not the bank's responsibility to make shareholders aware of the e-voting process and assist them, but the depositories NSDL and CDSL.
The bank also said that seeking screenshot of successful voting was a result of inquiry by certain shareholders on "whether their voting has been successfully recorded or do they need to again attempt for voting", according to the regulatory filing.
However, SEBI concluded that some of the bank officials have gone beyond the outreach programme by making repeated calls, asking for screenshots of voting and more when the markets regulator examined investor complaints.
"From one of the call recordings shared, it was observed that the shareholder of I-Sec was informed by your Bank officials that opting for the scheme would be beneficial, which was clearly beyond an outreach programme," SEBI said in its letter.
Citing one of the responses by the bank on justification that the outreach was to ensure a balanced factual position, SEBI said that since ICICI Bank is a promoter, there was a clear conflict of interest. "The heightened outreach programme on the last day of voting citing holidays/weekend appears inappropriate," SEBI said.
The markets regulator directed the bank to examine complaints for violations of guidelines of the outreach programme, and take necessary action against such officials. The actions must be informed to the board of directors and SEBI within 10 days of the board meeting, SEBI said.
