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Tainted stock broker Ketan Parekh and eight of his associates on Friday received a crippling blow, when the Supreme Court dismissed their appeals against an order of the Securities and Exchange Board of India that banned them from dealing in the securities market for 14 years.
Parekh, his cousin Kartik Parekh and others were found guilty of price manipulation in several shares including Zee TV, Himachal Futuristics Communication Ltd, Global Trust Bank and Lupin during 1999-2000.
The other parties involved in the price rigging were Saimangal Investrade, Chat Computers, Panther Fincap and Management, Panther Investrade, Luminant Investment Ltd, Classic Credit and Classic Infin Ltd.
Arguing that Securities Appellate Tribunal had exonerated other entities and also reduced the quantum of punishment, Ketan Parekh alleged that he was being treated unequally compared to other persons and entities such as Credit Suisse First Boston and Dresdner Kleinwort Benson, who were suspended for a period of 2 years and 18 months, respectively.
While stating that the Sebi decision affected his business and livelihood, he stated that the tribunal's judgement upholding the market regulator's decision was "grossly disproportionate, excessive and unreasonable."
Parekh had submitted that synchronisation or matching of trade was perfectly legal and permissible in the securities market and the tribunal had also observed that "a synchronized trade or trade that matches off market is per se not illegal."
"Every trade, whether executed on the platform of the stock exchange or off-market, must be matched as to the quantity and the price before it gets executed."
"All trades executed in the manner result in beneficial transfer of ownership of shares from the seller to the buyer. Mere volumes or value of transactions do not make such
transaction illegal. . .," Parekh had stated in his petition.
According to him, the price discovery mechanism of the stock exchanges was not distorted as the trades were executed at the prevailing market price and within the price-barrier and price-restriction imposed by Sebi to control fluctuations.
However, Sebi had contended that the stock broker had aided and abetted entities associated with and controlled by him in violation of the provisions of the Sebi (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 1995.
The acts of the broker were in violation of the Code of Conduct for Stock Brokers specified in Schedule II to the Sebi (Stock Brokers and Sub Brokers) Regulations, 1992, it added.
Sating that synchronisation could not have occurred without active participation of the broker, Sebi alleged the broker had traded in the scrip in high quantities and indulged in synchronised trades, thus resulting in creation of an artificial market for the scrips and manipulation of the prices of the same.