New Delhi: The Securities and Exchange Board of India (Sebi) has found the nexus among stock broker Ketan Parekh, certain foreign institutional investor and overseas corporate bodies as responsible for the crash of the share market soon after finance minister Yashwant Sinha presented the budget.
In its interim report, the summary of which was published by The Economic Times, Sebi explained how market players took advantage of the system to manipulate share prices in violation of the regulatory norms.
The report revealed that investigations were in progress regarding the links between Ketan Parekh, the main accused in the stock scam, and trades in scrips of companies like DSQ Software, Global Telesystems, Pentamedia Graphics, Satyam Computers, Zee Telefilms, Aftek Infosys, Ranbaxy Laboratories, SSI, Silverline Technologies, HFCL, Global Trust Bank, Padmini Technologies, Shonkh Technologies, Lupin Labs and Adani Exports.
Mr Parekh has been indicted for receiving substantial financing from banks and corporates which he is alleged to have used for stock market operations. Sebi has particularly indicted the Credit Suisse First Boston for facilitating creation of an artificial market in certain scrips through circular trading.
Sebi has decided to enlarge the scope of investigations into the activities of bears like Nirmal Bang, First Global, R S Damani, CSFB and Ajay Kayan to cover their trades over longer term.
Shankar Sharma of First Global, the main financier of tehelka.com, has emerged as one of the main protagonists of market manipulation in the Sebi report.
The following are the highlights of Sebis interim report on the securities scam:
- Stock broker Ketan Parekh received substantial amounts from banks and corporates which he used to manipulate the prices of scrips.
- Credit Suisse First Boston helped create an artificial market in certain scrips through circular trading.
- First Global Stock Broking utilized clients funds to meet payment obligations for proprietary trades.
- Income Tax departments investigations revealed that Shankar Sharma of First Global, the main financier of tehelka.com, had issued false contract notes worth Rs 2.9 crore for certain clients. Trades by First Globals Mauritius subsidiary have shown a consistent selling pattern between October 2000 and January 2001.
- Anand Rathi, former Bombay Stock Exchange president, abused his position to access and use sensitive information from BSE officials for benami trades.
- Nirmal Bangs group and First Global charged with fictitious dealings and prejudicial business practices.
- The trades of Ketan Parekhs Luminant, Classic Credit, Classic Share, and Panther Fincap which sold through CSFB were not genuine transactions and violated Sebi norms.
- Nishkalp Investments and Trading Co. Ltd., a subsidiary of Tata Finance Ltd, acted as a conduit for Ketan Parekh to pick up shares from a preferential allotment shares of Global Trust Bank.
- Vidyut Investments Ltd, a subsidiary of pharma giant Ranbaxy, provided large funds to entities associated with Ketan Parekh. Ranbaxys stock prices quadrupled on account of the nexus.
- DSQ manipulated share swap deal. Manipulated cash deal with US co, Fortuna Technologies Inc. to show that the acquisition was to be funded by a share swap.
- Global Trust Bank rigged prices before its merger with UTI with the help of Ketan Parekh through circular trading.
- Promotersshareholding in Lupin Laboratories came down from 80 to 65 per cent between August 1999 and February 2000 while Ketan Parekhs companies acquired significant shares from the promoters.
- Ketan Parekh group held substantial stake in Aftek Infosys Ltd, exceeding the threshold limit of 15 per cent, thus violating Sebi regulations. Stock prices were manipulated through circular trading.