Prime Securities, which has faced a string of actions against it by the National Stock Exchange (NSE) and the Securities and Exchange Board of India (Sebi), is yet to inform shareholders of its woes. The company, listed on the BSE and the NSE, has about 25,000 public shareholders who haven't been notified of its troubles, including stoppage of broking activity.
A few months ago, the NSE had disabled the terminals of the brokerage, a source said. This effectively means the brokerage cannot execute trades on behalf of its clients, a key part of its business. Broking accounted for 36.7 per cent of its revenue, according to the company's last annual report; it accounted for Rs 7.84 crore of the Rs 21.37-crore revenue in the financial year ended March 2012.
J N Gupta, founder and managing director, Stakeholders Empowerment Services, and former executive director of Sebi, said the company's shareholders should have been informed. "Clearly, it is a case of corporate governance failure at Prime Securities, for which the promoter and the entire board should be held accountable. This is extremely price-sensitive information, which should have been shared with the shareholders,"he said.
M S Sahoo, secretary of the Institute of Company Secretaries of India and former Sebi whole-time member, agreed. "Anything that is price-sensitive must be disclosed…If it is affecting business, they must formally disclose it to exchanges," he said.
N Jayakumar, managing director at Prime Securities, didn't respond to a call and a message seeking comment. On visiting his office, it was found he had left the premises 10 minutes ago'.
Prime Securities has 100 per cent public shareholding. According to an exchange notification at the end of quarter ended June, it had 25,485 shareholders. Market veterans said in the early 90s, the brokerage was seen as the place to be'.
On Thursday, the NSE and Sebi had barred 26 entities, including Prime Securities, from accessing the market. The ban is effective for six months or until an investigation into the brokerage's activities, as well as into trading in the shares of Gitanjali Gems
, is completed, according to an NSE announcement.
Earlier, the exchange had announced it was holding back payouts in transactions involving Prime. The brokerage had also defaulted on payments to the exchange. Subsequently, its terminals were disabled. None of this finds a mention in the company's notifications to shareholders.