Did ICICI Securities violate shareholder privacy and administration regulations?

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Minority shareholders have alleged that ICICI Securities, a subsidiary of ICICI Bank, violated shareholder privacy and administration regulations. They claim that the company shared shareholder details with ICICI Bank and that employees of the bank contacted shareholders, misleading them to vote in a particular way under the pretext of “spreading awareness.”

Lawsuit Filed by Minority Shareholders against ICICI Bank

The lawsuit was filed by minority shareholders, led by Bengaluru-based investment manager Manu Rishi Guptha. The shareholders argue that ICICI Bank influenced them to support the delisting of ICICI Securities’ broking subsidiary from Indian stock exchanges. They assert that it was ICICI Bank employees, not employees of ICICI Securities, who contacted public shareholders and persuaded them to vote in favor of the delisting proposal. The minority shareholders further claim that bank employees created a PowerPoint presentation to manipulate and exploit shareholders’ lack of technological expertise.

Allegations of Manipulation by ICICI Prudential Mutual Fund

The petitioners also alleged that ICICI Prudential Mutual Fund, an asset management company under the ICICI umbrella, purchased a significant number of shares one month before the voting and then voted as if it were a public shareholder. They argued that ICICI Prudential Mutual Fund should be considered part of the promoter group rather than a public shareholder. The counsel for the minority shareholders contended that the mutual fund’s actions were deceptive and aimed at influencing the outcome of the vote.

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Response from the Bench and Market Regulator

In response to the allegations of ICICI Securities coercing retail shareholders into voting favorably, the bench suggested that shareholders should be knowledgeable about which shares to invest in and should be aware of potential manipulative tactics. The Securities and Exchange Board of India (SEBI), the market regulator, may initiate an investigation into the voting process.

Approval for Delisting and Merger with ICICI Bank

In March, ICICI Securities announced that it had received approval from 72% of the public shareholders for the delisting and merger with ICICI Bank. However, Quantum Mutual Fund raised objections in April, claiming that the merger scheme was flawed and riddled with irregularities. The fund house specifically raised concerns about valuation and alleged fraudulent practices employed to secure votes.

Delisting Details and NCLT Hearing

Under the delisting plan, for every 100 shares of ICICI Securities, shareholders would receive 67 shares of ICICI Bank. The National Company Law Tribunal (NCLT) is currently hearing the matter. Reports suggest that SEBI may investigate the voting process. The minority shareholders argue that the delisting permission from SEBI was obtained under misleading circumstances.

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Next Steps

The next hearing for the case is scheduled for July 2. Additional Solicitor General N Venkatraman, representing SEBI, requested to be removed as a responding party in the matter, as the shareholders’ concerns do not directly involve the regulator. SEBI will provide the court and appellants with the letter granting approval to ICICI Securities.

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