Indian markets regulator Securities and Exchange Board of India (SEBI) said on Friday that it was probing certain IPOs on fears of inflating subscription numbers.

What Happened: SEBI Chairperson Madhabi Puri Buch said the market watchdog was investigating the use of mule accounts and the practice of submitting faulty IPO applications to create the illusion of high subscription amounts.

Mule accounts, in the context of IPOs (Initial Public Offerings), refer to accounts established by individuals or entities to manipulate the allocation of shares during the IPO process.

See Also: Tata Fund-Backed Small Cap Stock Jumps 5% After Bagging ₹400 Cr Order

Why It Matters: Illegitimate actors may use mule accounts to secure a larger share of the IPO allocation than they are entitled to, potentially taking advantage of the stock’s initial price surge for unlawful gains.

This practice can involve submitting multiple applications using different identities or exploiting loopholes in the allocation process, ultimately leading to market manipulation and unfair advantages.

Details Awaited: Buch expressed dissatisfaction with the observed malpractices and mentioned that certain merchant bankers’ names frequently surface in connection with such practices.

Buch did not disclose the specifics of the three cases under investigation, nor did she clarify whether they pertain to mainboard IPOs or small and medium-sized enterprise IPOs.

The announcement came during Buch’s address at the AIBI Annual Convention 2023.

Read Next: Apple’s iPhone Emergency SOS Feature Set For Launch In India Soon: Here’s What We Know