SEBI Launches Investigation Into More Than 12 Domestic Merchant Banks Over SME IPO Due Diligence

The Securities and Exchange Board of India (SEBI) has launched an investigation into more than 12 domestic merchant banks over concerns regarding their due diligence processes for initial public offerings (IPOs) of small and medium enterprises (SMEs). This probe aims to address potential regulatory lapses and ensure compliance with SME IPO regulations, which are currently more lenient compared to mainboard listings. SEBI’s investigation follows warnings from its chairperson about the “froth” in small and mid-cap stocks and potential price manipulation in the SME segment. The regulator is considering tightening SME listing norms to protect investor interests, which may include more stringent disclosure requirements and audits. This move underscores SEBI’s commitment to maintaining market integrity and safeguarding investors from high-risk investments.