ICICI bank in trouble for allegedly influencing shareholders over delisting broking arm

ICICI bank has allegedly tried to influence the decisions taken by minority shareholders of ICICI Securities (I-Sec) to support the private lender's proposal to delist the broking and investment banking arm. As per The Economic Times, many shareholders claimed on social media that the bank's executives contacted them, coaxing to vote in favour of the resolution that proposes to delist the broking subsidiary.

ICICI bank under fire

As per Lawyers and Market Participants quoted by The Economic Times, this action of ICICI bank could result in regulatory scrutiny of the voting process. The e-voting for the delisting of ICICI Securities began on March 22 and ended on March 26.

Also Read: RBI slaps penalties on ICICI Bank and Kotak Mahindra bank for breaching regulatory standards

As per media reports, five shareholders of ICICI Securities, said the ICICI Bank’s branch employees have called and made home visits persuading them not just to vote, but also to vote in favour of delisting. While all five got calls, only one got a home visit. The callers sometimes even asked for proof of voting in the form of screenshots of a confirmation message received after e-voting.

"The fact that mid-level and junior-level executives of ICICI Bank are personally calling ICICI Securities shareholders over the weekend is a reflection and almost blatant acceptance of the injustice being inflicted by the bank on minority shareholders of ICICI Securities," Manu Rishi Gupta, founder of MRG Capital, a Bengaluru-based investment fund told The Economic Times. MRG Capital has been one of the most vocal opponents of the delisting plan. "We have sufficient evidence to demonstrate the unlawful actions of ICICI Bank, which we will share with all regulatory authorities", he added.

ICICI Securities de-listing

ICICI Bank aims to de-list ICICI Securities via a share swap deal. As per the terms, for every 100 shares held, public shareholders in ICICI Securities would receive 67 shares of ICICI Bank. The share swap ratio for delisting the brokerage has been opposed by a section of minority shareholders.

What next for ICICI Bank?

The Economic Times quoted Securities Lawyers and said that rules do not explicitly bar players from influencing such decisions, but ICICI Bank may be treading in the regulatory twilight zone.

"PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, which prohibit deceptive practices in securities markets, and the LODR Regulations, enforcing transparent disclosure of information that impacts investor decision-making, are the key regulations that play a key role in market integrity," Sonam Chandwani, managing partner at KS Legal & Associates told The Economic Times.

"Furthermore, the Sebi Regulations, designed to ensure fair procedures in acquisitions or delisting, and the Prohibition of Insider Trading Regulations, which guard against the misuse of confidential information, are also significant", she added.

The report further mentioned that Indian Market Regulator SEBI may also look into the matter.

"Seeking support for voting in a specific manner isn't explicitly regulated or forbidden but is grounded in corporate governance principles and ensuring fairness in the process," Sumit Agrawal, founder of Regstreet Law Advisors told The Economic Times. "Sebi possesses extensive authority to investigate such practices and, in response to any complaints, can implement heightened scrutiny on the voting process."

Meanwhile, media reports have suggested that ICICI Bank's largest public shareholder, Norges Fund Investment Bank, voted in favour of the resolution. Quantum Mutual Fund said recently it voted against it.