Members with corporate interest not to attend meet: JPC chairman

Our Economic Bureau

New Delhi, May 15: STOCK broker Ketan Parekh and his associates have misused banking funds to the tune of Rs 1,200 crore for manipulating stock market prices, said the Securities and Exchange Board of India (Sebi) in its preliminary report on the stock market scam submitted to the members of the Joint Parliamentary Committee (JPC) on Tuesday.

In a bid to overcome the problem of misuse of banking funds in capital markets, the Sebi has suggested establishment of a centralised monitoring mechanism to track flow of funds from banks to the entities operating in the stock market.

The Sebi report also suggested a host of other systemic measures to prevent stock market scam in future which include standardisation of the composition of settlement guarantee funds/trade guarantee funds across the exchanges, strengthening of surveillance departments of the stock exchanges in terms of infrastructure, systems and manpower and increase in cash component in the margins and mandatory charging of margins from the clients.

The Sebi report further said that there was a nexus between Mr Parekh and promoters of various companies, who provided funds aggregating Rs 800 crore to the stock broker for creating an artificial market in certain scrips leading to market manipulation. The companies named by Sebi include HFCL, Zee Tele, DSQ Software and Global Tele. Mr Parekh dealt extensively through CSFB broking and CSL Securities, said the report.

As far as bear operations were concerned, the Sebi report mentioned Nirmal Bang group, First Global group of Shankar Sharma, Shailesh Shah group, Ajay Kayan group, Radha Krishan Damani group and BLB group for indulging in irregular market practices with the intent of depressing markets.

The report said that Nirmal Bang group of entities had substantial dealings through CSL Securities and also through an unregistered entity namely Palombe Securities.

The Sebi has also blamed some of the bear operators for taking recourse to collusive transactions through nondescript entities, indulging in circular trading, structural arrangements and irregular practices amounting to market manipulation.

The report also mentioned that CSFB, a foreign broking firm, had indulged in irregular trade to facilitate funding of Mr Parekh and his entities by resorting to collusive trades with counter-party brokers of the Big Bull.
One of the sub-accounts of CSFB, as foreign institutional investors (FII) has also been extensively used for transactions in select scrips and “transaction appears to be a part of the manipulative process.”

The report further said that Sebi was examining the role of JM Morgan Stanley Securities in the stock market scandal.