Sebi pins 5 brokers in bank stock scam

The Securities and Exchange Board of India (Sebi) has named five broking houses as prime suspects in the recent Rs 400000000 bank stock scam. Banking secretary Vineeta Rai, it is understood, has submitted the interim report by Sebi to Finance Minister Jaswant Singh on Monday. However, the report has not named any finance ministry official for their involvement in the scam as of now. The finance ministry has decided to keep the names of the brokers under wraps till the investigations are over. Between the last week of May and the first week of June, bank stocks fluctuated wildly after contradictory reports on indications that the finance ministry might offer premium to the banks on the equity which is being returned to the government. According to sources, the finance ministry’s banking division has put on record its observations on the report and placed the entire file before the Finance Minister. The report has estimated that the total amount involved in the bank stock scam is to the tune of Rs 400000000. While this is the first interim report, another set of reports are expected from Sebi. In the next report Sebi is expected to go in details of the scrip movement. However, sources said that the report has not named any officials so far. Questions have been raised by the ministry about the jurisdiction of Sebi to go into investigations involving the finance ministry officials. The ministry itself is exploring the possibility of the involvement of both former and present ministry officials in the bank stock scam. In fact, ministry officials did not rule out the possibility of an internal enquiry in the issue of involvement of former and present finance ministry officials. ‘‘About involvement of the ministry officials, the finance ministry has to satisfy itself about three facts. Prima facie there has to be evidence of the fact that statements issued by ministry officials could have induced the volatility in the bank stocks. It needs to be proved that these officials had malafide intention and finally within these broad parameters the role of some officials could be scrutinised. Only after being satisfied on these issues would the ministry think of involving an external agency for investigation,’’ sources said. No decision has yet been taken on whether the CBI would be involved in the investigations. Other agencies are there too and no decision has yet been taken on whom to involve, sources added.