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Sebi pegs Ketan Parekh's involvement at Rs 20 billion

BS Economy Bureau

The Securities and Exchange Board of India has estimated Ketan Parekh's involvement in the recent stock market scam at Rs 20 billion.

Sebi's investigations on market manipulation has revealed that while Parekh's nexus with promoters of several companies provided him funds of about Rs 8 billion, his misuse of the banking system through several entities gave him access of over Rs 12 billion.

According to Sebi, there are indications that Parekh used these in stock market operations and manipulated prices of scrips including HFCL, Zee Tele, DSQ Software and Global Tele.

The trading activities of Parekh and his associate entities reveal patterns indicating cornering of shares, circular trading, parking as well as structured arrangements.

The report was circulated on Tuesday among the members of the Joint Parliamentary Committee set up to look into the stock scam.

The market regulator also said Parekh had a nexus with certain FII sub-accounts and overseas corporate bodies through which he carried out very large transactions in some of his favourite scrips.

The broker created and sustained large positions by operating through several entities across the exchanges and also by dealing extensively through Credit Suisse First Boston, a foreign broking firm and CSL Securities.

Sebi said that the sharp fall in the Sensex on February 23, March 2 and March 13 was on account of unwinding of long positions, short sales, delivery-based sales including those of institutions. Nirmal Bang, Shankar Sharma's First Global, Shailesh Shah, Ajay Kayan, R K Damani and BLB group also appear to have indulged in transactions aimed at depressing share prices, Sebi has noted.

In a series of stringent systemic measures, Sebi has suggested establishing a centralised monitoring mechanism for fund flow from banking sector to the entities operating in the stock market. This will double check banks' exposure to capital markets over and above the RBI prescribed limit of 5 per cent of incremental deposits.

It has also called for impounding of one-third of hawala profits in carry forward segments including BSE's BLESS and NSE's ALBM.

Sebi has said that the events leading to the stock market crash have indicated that the exchange surveillance mechanism could not properly detect excessive concentrations in the market. The surveillance and monitoring mechanism needs to be strengthened in terms of infrastructure, systems and manpower, it added.

Besides asking for more investigation and penal powers, the market watchdog has said there was an urgent need to beef up its own manpower and infrastructure in the areas of surveillance, investigation and inspection of stock exchanges and intermediaries.

This would help it achieve proactive and improved oversight in the area of monitoring and surveillance done by exchanges and also for expeditious completion of investigations.

Sebi has also noted that Calcutta Stock Exchange committed irregularities in terms of not charging proper margins and allowing members to cross exposure limits in their trading.

The exchange also failed to examine issues related to unauthorised carry forward inspite specific communication to the exchange.

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