Imprisonment of up to five years stares IPO scamsters in the face.
Commercial banks involved in the scam will be penalised by the Reserve Bank of India, if found guilty of gross negligence of the 'know your customer' (KYC) norms.
Section 68(A) of the Companies Act says, "Any person who makes in a fictitious name an application to a company for acquiring or subscribing to any shares therein or otherwise induces a company to allot or register any transfer of shares therein to him or any other person in a fictitious name shall be punishable with imprisonment for a term which may extend to five years."
Companies entering the market are required to mention this in their IPO prospectus.
Operators that have abused IPO allotment norms have already been barred from transacting in the securities market by the Securities and Exchange Board of India.
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