TWO top-ranking officials of the Securities and Exchange Board of India (SEBI) are under suspicion of corruption and will face an internal inquiry. The officials, whose names have not been disclosed, have been accused of favouring M S Shoes, which offered equity shares to the public at a premium of 189 rupees (about HK$48) per share. The shares have a face value of 10 rupees. The company ran a television advertisement comparing its issue price of 189 rupees with the 'current' market price of 505 rupees - the share's highest price reached in the last 52 weeks. It is actually trading in the stock markets at about 435 rupees. M S Shoes tried to show that it was making amends by issuing a 'corrigendum' about the ruling market price in the daily newspapers on February 13. 'But the ad actually hid more than it revealed,' said L C Gupta, a New Delhi-based SEBI member. 'The price is bound to fall steeply, once the fresh equity is accounted for. This risk factor should have been highlighted. Moreover, their TV ad remained unaltered,' he said. Mr Gupta said that exchange officials were not doing enough to prevent the company from propagating the company's incorrect share price. 'The SEBI officials concerned have a lot of explaining to do to the board, including the deviation from the prescribed guidelines,' he said. 'The officials, at best, took weak action in the matter.' The move to seek explanations from the exchange officials could have wide-ranging implications for the capital market. This is the first time that the exchange board will intervene and pin accountability on its officials for their actions. The controversy is snowballing into a larger policy question of what should be the prudential norms to be followed by exchange officials. Merchant bankers also point out that M S Shoes was the first company to demand, and obtain, specific exemption from the rule that says that the gap between the closure dates of rights and public issues should not exceed 30 days. 'There is no uniformity in the recent clearances given by SEBI to various public issues,' a merchant banker said. 'SEBI's actions are getting more and more arbitrary.'