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First Global picks holes in Sebi report

BS Markets Bureau

First Global Securities, which has been barred from trading by the Securities & Exchange Board of India, has pointed out several material falsehoods in the Sebi report and alleged that many of its contentions are factually incorrect.

At a press conference held today, the firms director Shankar Sharma said that Sebi has included various data tables in its report pertaining to First Global purporting to support its contention that the brokerage had attempted to artificially depress the markets, but that a number of tables in the report contain data that is materially false.

First Global Stockbroking -- which has moved court against the Sebi decision -- has said, "Unwinding of previously held long positions, which must be one of the most natural acts in the stockmarket, are treated as short sales. Even delivery-based sale positions are treated as short sales, and arbitrage trades are termed circular trading."

Sebi debarred certain broking entities, including Credit Suisse First Boston, Nirmal Bang, CSL Securities and First Global Stockbroking, in the aftermath of the stockmarket crisis.

The petition, filed by First Global, controlled by Shankar Sharma and Devina Mehra, alleged malafide on the part of Sebi in taking the action it did.

Sebi has in its affidavit has drawn up a table suggesting that Sharma traded through outside entities even when his company still had sufficient exposure limits with the Bombay Stock Exchange. The tabular exhibit, submitted along with the affidavit, shows large exposure limits on most days while on certain days First Global Stockbroking had negative exposure limits.

However, stock exchange officials said, "No broker can have negative exposure limits. The electronic trading system of the exchange would automatically freeze a broker's terminal when it approaches his exposure limit. Hence exposure limit can never be negative."

A senior Sebi official however said that it was possible that factual errors could have crept into the report since it was prepared in a record time of less than five weeks. Shortage of manpower was a constraint the regulator faced. "Being a preliminary report, there is still scope to rectify these mistakes as an when they surface," the official said.

Sebi has alleged that during certain time slots when the market went down, First Global sold large quantities of certain scrips. It has alleged that First Global sold HFCL scrip heavily on the BSE, during a seven-minute period (15:06 - 15:13 hrs) on March 1. First Global actually had a purchase of 55,000 shares during this time slot while Sebi has alleged that it had a net sale position of 48,840 shares.

The securities watchdog has alleged that certain funds taken under cover of arbitrage were actually on a fixed return basis, but affidavits filed in court indicate that the returns actually varied between 5 per cent and 33 per cent per annum.

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