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Sebi blames brokers' cartel for stockmarket crash

India's capital market watchdog has blamed a cartel of brokers and foreign funds for the crash in share prices soon after the presentation of the Union Budget on February 28, a business daily reported Thursday.

The Securities and Exchange Board of India, in its interim report on the stockmarket scam of 2000-01, finds a nexus between brokers, mainly Ketan Parekh, who is also known as the 'Bombay Bull' for his market manipulating tactics, and overseas corporate bodies, a financial daily said.

Bombay-based broker Parekh was arrested by the Central Bureau of Investigation in May on charges of defrauding cooperative and public sector banks for playing in the market. He is currently on bail.

Indian stock exchanges were rattled by a blizzard of allegations of insider trading a day after the presentation of what was widely hailed as a reformist budget for 2001-02. The benchmark index lost over 8 per cent in March following the turmoil.

The Sebi report on the market crash, which was submitted to the government Wednesday night, has indicted Parekh for obtaining substantial financing from banks and corporates and using it for stock market operations.

Parekh has also been accused of violation of takeover code and misuse of the overseas corporate bodies norm. The report is a continuation of the preliminary investigation report submitted by the regulator in April.

Global brokerage major Credit Suisse First Boston gets the distinction of becoming the first foreign institutional investor to be severely reprimanded by Sebi for fraudulent dealings in the market.

According to Sebi, CSFB allegedly facilitated creation of an artificial market in certain shares through its own account.

Sebi has concluded that the trades of Luminant, Classic Credit, Classic Share, Panther Fincap -- which are all Ketan Parekh's entities and sold shares through CSFB - were not genuine transactions and were in violation of the regulator's norms.

On the basis of the preliminary findings, Sebi has decided to enlarge the scope of the investigation into the activities of "bear operators" like Nirmal Bang, First Global, R S Damani, CSFB and Ajay Kayan to cover their trades over a longer term, the daily said.

It is also possible that the Bombay Stock Exchange ex-president Anand Rathi abused his position to access and use sensitive information from BSE officials for unofficial trades, the report said.

Sebi has asked the Income-Tax department to furnish details of unofficial accounts or unofficial trading that may have surfaced during search and seizure operations conducted on Rathi after he resigned on charges of insider trading.

Indo-Asian News Service

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