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Mumbai: In a startling move, the market regulator Securities and Exchange Board of India (Sebi) has barred 26 entities from dealing in the capital markets for acting as conduits for Ketan Parekh and executing synchronised deals in five scrips over a period of 26 months from January 2007 to February 2009.
Sebi in its investigation found that these entities were acting as conduits for routing Ketan Parekh funds in the securities market. It has referred the matter to the Enforcement Directorate. Ketan Parekh and his associated entities were earlier barred by Sebi from the capital market following the 2000-2001 stock market scam.
The major entities that have been barred from the securities market include Maruti Securities Ltd (MSL), Kundan Leasing & Finance Pvt Ltd, Chandra Financial services Pvt Ltd, Jay Investrade Pvt Ltd and HSM Financial Services Ltd. These entities allegedly executed synchronized trade in five scrips, which includes Cals Refineries Ltd, Confidence Petroleum India Ltd, Bang Overseas Ltd, Shree Precoated Steels Ltd (SPSL) and Temptation Foods Ltd (TFL).
Sebi in its order noted that “In all these trades, buy and sell order quantities and buy and sell order rates were same. The orders had perfectly matched and time difference between the placement of buy and sell orders was less than 60 seconds. In all the trades, connected clients were appearing simultaneously on both sides of the trade”.
In the above mentioned trades, these entities made a profit of Rs 42.01 lakh, 4.72 crore respectively on account of their dealing in the scrips of Confidence Petroleum and bang Overseas Ltd. However, they incurred huge losses of Rs 3.68 crore, Rs 7.64 crore and 4.68 crore respectively while dealing in the scrips of Cals Refineries, SPSL and TFL.
The regulator noted that “Despite having made such losses, they continue to execute such uneconomic transaction indicates that they possibly had alternative pay-offs outside the securities market. In addition they would have also paid reduced income tax on account of the set off of the losses incurred in their dealing”.
During the course of investigating by Income Tax departments in to the source of funds for repayment of loan of Rs 26.43 crore during August 2008 to Madhavpura Mercantile Corperative Bank (MMCB) by Ketan Parekh, it was found that the payment originated from, KNP Securities Ltd, a Ketan Parekh group company and was routed through various entities named in the order.
The order notes that...
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