Business Daily from THE HINDU group of publications
Saturday, Jul 15, 2006
Markets - Economic Offences
Friday's order by SAT is one of very few high-profile cases won by SEBI in recent times.
Among prominent cases SEBI lost is SAT setting aside SEBI order suspending registration of First Global Stock Broking.
Mumbai , July 14
The Securities Appellate Tribunal (SAT) on Friday upheld the Securities and Exchange Board of India order banning trader Mr Ketan Parekh and eight associates from dealing in the securities market for 14 years.
Mr Parekh and others were found guilty of price manipulation in several shares during the 1999-2000 period.
In its 60-page order the SAT, however, said SEBI made a `grave error' in letting off two foreign brokerages, Credit Suisse First Boston (CSFB) and Dresdner Kleinwort Benson (DKB), with lighter punishments for the same offence.
The order by Mr Justice N.K. Sodhi, Presiding Officer, and Members Mr C Bhattacharya and Mr R.N. Bhardwaj, said, "The appellants (Ketan Parekh and eight associates) have rigged the market in a big way and the penalties imposed on them are quite reasonable having regard to the gravity of the charges proved."
Mr Parekh and his associates were banned for 14 years by SEBI through its order on December 12, 2003. KP's, as Mr Parekh is known in market circles, favourite stocks during 1999-2000 included Zee TV, Himachal Futuristics Communication Ltd, Global Trust Bank and Lupin.
Friday's order by SAT is one of the very few high-profile cases won by SEBI in recent times. Among the prominent cases that SEBI lost include the SAT setting aside SEBI order suspending the registration of broking firm First Global Stock Broking owned by Mr Shankar Sharma. It had also set aside SEBI's order banning the former Chief Investment Officer of Alliance Mutual Fund, Mr Sameer Arora, from dealing in the Indian securities market for five years.
`Proved beyond doubt'
In Mr Ketan Parekh's case, the SAT said it was proved beyond doubt that three entities - Classic Credit Ltd, Panther Fincap & Management and Saimangal Investrade Ltd - were used for the market manipulation. Mr Parekh, who was director in all these three entities, controlled them in their day-to-day activities.
The other parties involved in the price rigging are Kartik K Parekh, Luminant Investment Ltd, Chitrakut Computers Ltd and Classic Infin Ltd.
Recently, the Forward Market Commission had asked commodity bourses to verify whether any Ketan Parkeh associates were doing transactions through the exchanges.
`Let off lightly'
While the SAT upheld the SEBI order against Mr Parekh, the Tribunal felt that CSFB and DKB got away with lesser punishments. SEBI had banned CSFB for 18 months and DKB for two years. "The board was not justified in letting off the two brokers lightly by imposing on them a penalty which was clearly disproportionate to the gravity of the charges proved against them," the SAT's final order said. CSFB's 18-month ban period came to an end recently and reports indicated that the FII was likely to re-enter the Indian securities market.
The order details price manipulation in the shares of Lupin Ltd during the April 1999-January 2000 period. The SAT said the share price of Lupin went up steeply with huge volumes during the period without any reason. In contrast, other pharma stocks such as Ranbaxy, Glaxo, Novartis and Cipla were not attracting any activity during the same period, the Tribunal noted.
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