The role of the crack team will be to gather intelligence from the marketplace and from government quarters, analyse the data and pass on sensitive information to concerned offices and officers.

The need for advance information on a systematic basis was felt by the ministry after having recieved information on the possibility of a software scam of sorts taking place because of a huge increase in the share prices of information technology companies. Eyebrows were raised by the ministry when it scrutinised data from the Registrar of Companies which showed that as many as 17 odd companies have changed their focus of activity to IT and related fields and changed their names as well.

The ministry thinks that an adequate check should be kept on these nascent IT companies so that theydo not exploit investor sentiments by manipulating share prices. The concept of an `Alert Team' was subsequently mooted.

Six companies were reported to have converted into IT companies within the short span of a few weeks. They are Bell South Enterprises (which has become BSEL Information Systems), Century International Finance (Cyberspace Infosys), Disha Financial Services (Southern Infosys), Fiduciary Capital & Financial Services (Omega Interactive Technologies), Shailbhadra Securities (Shailbhadra Infosec) and Vidhan Mercantile Co (VMC Software).

The ministry is expected to write to Sebi, RBI and the Department of Company Affairs on the formation of the `Alert Team'. It is likely that officers will be drawn from these authorities and housed together so that intelligence gathering work can begin in earnest. The ministry is of the view that scams in the market occur because of loopholes in the law, little or delayed punishment, poor flow of information and lack of a dependable alerting network.

Theministry has already started monitoring the share prices of some of these companies, which have already been placed in some kind of an unofficial watchlist. After change of name, some of them have shown substantial share price movements of anywhere between 50 per cent and 500 per cent. The ministry is keen to know whether these movements are genuine based on the underlying strength of the companies.

Market experts claim that quite a few of these name switches could well be genuine. But there would be some who are interested in exploiting the current stock market rage about IT companies. The share prices can be manipulated substantially upwards before the promoters either unload their shareholding at the higher price or come out with a premium-based public issue. If the investors rush into these issues, the likelihood of a scam cannot be ruled out.

The ministry is also having a discussion with the Registrar of Companies on the issue of change of name. Today, the name change can be done easily--by fillingup a form. But the ministry is of the view that proper due diligence should be done to ensure that such changes are not cosmetic in nature. The possibility of switching names only after the switch in activity has actually occured is also being explored.

A watch is also being kept on the share price movements of IT companies-- like Sonata and Shri MM Softek--which have tapped the markets to ensure that there is no undue speculation. Three companies--Kpit Systems, SQL Star International and Cybermate Infotek--have filed their prospectus with Sebi for tapping the public issue market.