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SEBI price-rigging probe exposes Harshad Mehta, 17 others

The Securities and Exchange Board of India has held responsible 18 stockbrokers for price manipulation in the BPL, Videocon and Sterlite scrips which reportedly led to a payment crisis on the country's two largest bourses, the Bombay Stock Exchange and the National Stock Exchange in the month of May by acting merely as a front for Harshad Mehta, the main accused in the securities scam of 1992.

The SEBI's probe has revealed that a set of seven brokers acted mainly on behalf of a common set of clients and cornered very large chunks of scrips both on the BSE and the NSE. The brokers and the common set of clients acted in a concerted manner, by building up unusually large positions in the distortion of the market equilibrium and the artificial creation of market.

Following the investigations, enquiry proceedings as prescribed under under the SEBI regulations have been initiated against 23 BSE brokers and 11 NSE brokers. The SEBI considered the seriousness of involvement of some brokers, the extent of dealing and repeated involvement in some cases.

To prevent frauds, the SEBI decided to prohibit 18 brokers, 12 of the BSE and six of the NSE from undertaking fresh activities of broking till the enquiry proceedings are completed and further order passed, the SEBI release stated.

The scrips of BPL, Videocon International and Sterlite showed an abnormal movement of prices and volumes during April and May 1998.

There were allegations that Harshad Mehta was behind these manipulations. The SEBI named seven other brokers: Damyanti Finvest Private Limited, CDP Fincap and Leasing Private Limited, KRN Finvest and Leasing Limited, Rijuta Finvest Limited, Isku Finvest Private Limited, Burlington Finance Private Limited and Money Television India Limited who mainly acted on behalf of a common set of clients.

They belonged to a common group having common directors and common office. Investigations have revealed they were acting merely as front for Mehta who was involved in the scam of 1992.

These common set of entities built up very large positions in the three scrips and cornered huge quantities of floating stock. For instance, 70 per cent of the total stock traded for delivery in BPL in cash and carry forward system was cornered by these entities through the set of brokers who indulged in manipulation in connection with these entities.

In the scrip of Videocon and Sterlite, they cornered 40 per cent and 50 per cent quantity of deliverable trade. Investigations have revealed that other brokers who dealt mainly with the suspect brokers in the three scrips had transferred funds to each other frequently. They also built up huge carry forward positions in these scrips and even exceeded the exposure limits prescribed for trading, the SEBI release stated.

UNI