Nasscom moves Sebi on fake IT cos

MUMBAI, JAN 30: The apex body of the software industry, National Association of Software and Service Companies (Nasscom), has taken up th...

MUMBAI, JAN 30: The apex body of the software industry, National Association of Software and Service Companies (Nasscom), has taken up the issue of fake information technology (IT) firms with the Securities and Exchange Board of India (Sebi) and is actively working with the market regulator to formulate safeguards against such companies.

The move comes in the wake of an increasing number of media reports regarding firms which are christening themselves as IT companies merely to cash in on the IT boom on the stock markets. Nasscom itself has received a number of applications for membership from such companies during the past one year, Nasscom president Dewang Mehta told The Indian Express. "The list keeps on growing," he said about the applications.

Although membership to Nasscom has increased to 520 from 250 five years ago, companies are screened thoroughly before being admitted. Any company wishing to become a member of Nasscom has to compulsorily obtain references from existing members with a three-yeartrack record in the association. After which, the promoters’ background is investigated, and the proposed client-base and projections reviewed. The company is eligible only for associate membership in the first year and on achieving the projected targets qualifies to become a full-time member.

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"Our responsibility has increased," Mehta said about fears of an IT scam. The association is also planning an advertising campaign listing the names of fake companies to warn investors and "protect the image of the software industry". It is also taking up the matter with stock exchanges.

A Nasscom cell, which earlier looked into members’ earnings, is now handling the issue and gathering data on the subject. The advertising campaign is expected to kick off once Sebi comes out with the guidelines. Refusing to give details, Mehta said an announcement would be made by the market regulator in about a week’s time.