SEBI suspends 3 brokers in rigging case

The Securities and Exchange Board of India (Sebi) has suspended the registration of GNH Global Securities, Mahico Private Limited and Star Share and Stock Brokers in connection with the manipulations in the scrips of BPL, Videocon and Sterlite during June 1998. However, the regulator has not yet come out with the findings of its investigation into the role of the promoters of these companies in the rigging exercise. The suspension has been ordered for a period of 36 months for GNH Global Securities; 13 months for Mahico and 12 months for Star Share and Stock Brokers Limited from the date when the trading terminals were switched off by the exchanges, according to a Sebi press release. “It is not understandable why the SEBI is taking a long time to reveal its findings on the promoters. Brokers were hand-in-glove with promoters in this rigging,” said a market analyst. Investigations were conducted by Sebi into the alleged price manipulations in the scrips of BPL, Videocon and Sterlite, in the wake ofsudden payment crisis in the month of June 1998, on BSE and NSE. Investigations prima facie revealed that some brokers acting in a concerted manner for common set of clients built up unusually large positions in these scrips resulting in distortion of the market equilibrium and creation of artificial market. The investigations also brought out that these common set of clients were acting as a front for Harshad S Mehta, a suspended broker of the BSE and an accused in the securities scam of 1992. Based on these investigations, enquiry proceedings were initiated against the brokers involved and actions taken directing them not to undertake any broking activity till the enquiry proceedings are completed and appropriate orders passed. Enquiry proceedings have been completed in respect of GNH Global, Mahico and Star Share and Stock Brokers Limited The trading terminals of these brokers were switched off by BSE and NSE. After considering the recommendations of the enquiry officer, submissions made by these brokersmaterials and evidences available on record, it was found that these broker were involved in the manipulations in the scrips of BPL, Videocon and Sterlite. These brokers dealt for a common set of clients i.e., Damayanti Group for the first time who did not have any professional expertise in the securities market and financial soundness to deal at such large scale. They did not charge any upfront margins also from these clients. These brokers acting in concert with other brokers cornered a very large quantity of shares of BPL, Videocon and Sterlite and created artificial market and manipulated the prices.