Stock market scam: JPC flays SEBI

NEW DELHI JULY 22. The Joint Parliamentary Committee probing the stock market scam has come down heavily on the functioning of the market regulator, the Securities and Exchange Board of India (SEBI) in various aspects, with stress on the issue relating to the revised Automated Lending and Borrowing Mechanism (ALBM) and the role if its nominee Directors in particular. In its draft report, the JPC has blamed the SEBI for ``lack of vigilance which allowed the withdrawal of Rs.1,9000000000 from the ALBM mechanism in two weeks,'' leading to the stock market crash last year. The draft report, which has been circulated among JPC members, said the Committee found it ``appalling'' that the SEBI never realised the ALBM role in the market crash nor did it initiate any investigation into the ALBM after the crash. ``It is only at the instance of the JPC that the SEBI took up investigation of the ALBM and came out with a revealing report after persistent and probing questioning... the Committee would expect the SEBI to be more alert in the performance of its functions''. The JPC noted that the ALBM of the National Securities Clearing Corporation, which was introduced in February, 1999 was modified within 10 months without ``proper approval of the SEBI''. ``The SEBI's handling of the issue relating to the revised ALBM leaves much to be desired...It took seven months for the SEBI to decide that the issue needed to be examined by an expert group,'' the report said adding that the expert group, headed by J.R. Verma, had recommended some risk-containment measures but adequate risk-management measures were not put in place till October, 2000. Taking serious note of the ``inordinate delay'' in taking action by the SEBI on the modified ALBM, the Committee has suggested that the matter be investigated by the Finance Ministry and responsibility of those in the SEBI and the NSE be fixed. ``Funds to the tune of Rs. 1,9000000000 deployed by a major participant in the ALBM, and Vyaj Badla Financing in Calcutta Stock Exchange by the end of February, 2001, were withdrawn from the market between February 20 and March 7, 2001 and was reduced to nil.''