Regulations
SEBI mulls new group to check manipulation in penny stocks

To check market manipulation through penny stocks, the market regulator wants stock exchanges to create a new group T+ for scrips that are found to be prone to market manipulation

 

Market regulator Securities and Exchange Board of India (SEBI) would soon ask stock exchanges to create a new group for shares that are found to be prone to market manipulation through 'penny stocks', says reports.
 
The new group may be called 'T+' and would include shares that remain susceptible to manipulative activities despite having been put in the 'T' group. In T group the trading is restricted to delivery-based trades within a small price band of up to 5% and intra-day trades are not allowed.
 
The stocks in the new group could be subjected to even shorter price bands of up to 2%, while other restrictions could be put in place to ensure that only genuine trades are permitted on those counters, a senior official has been quoted as saying in reports.
 
It has been noticed that operators tend to push up the prices of T-group stocks ahead of their exit from such restricted trading categories, while the shares are dumped after luring gullible retail investors to these counters.
 
SEBI has already consulted stock exchanges and other stakeholders on this issue and the necessary framework for the new group would be put in place soon.
 
The stock exchanges classify various stocks traded on their platforms into several groups such as A, B, T and Z on certain qualitative and quantitative parameters.
 
The A-Group stocks are generally large-caps with strong business fundamentals, high public float of shares and better compliance record on corporate governance and regulatory fronts. The B-Group stocks mostly include mid-caps and some small-caps.
 
The T- Group includes stocks, which are settled on a trade-to-trade basis as a surveillance measure. These stocks usually attract a price band of five per cent, which is the maximum permissible limit within which the share price can move.
 
Under the trade-for-trade or T group segment, no speculative trading is allowed and delivery of shares and payment of consideration amount are mandatory.
 
The Z group includes companies, which have failed to comply with its listing requirements and/or have failed to resolve investor complaints.
 

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Economy & Nation Exclusive
Billionaire Subrata Roy strangely can’t raise money to get out of jail
Does Sahara really own the assets it claims to own? If so, why the struggle to sell some of them?
 
The government has been quick to send out notices to the Aam Admi Party (AAP) and Congress on their alleged benami election funding. But consider the silence of all tax agencies on the astonishing drama being played out before the Supreme Court of India in the Sahara Pariwar (group) case, even as group chairman Subrata Roy remains in jail for almost a year. 
 
Why is a man, who had an endless supply of money to acquire marquee properties around the world, sponsor the Indian cricket team for years, gift lavish bungalows to cricketers, claim ownership of several sports teams and stadia and throw lavish parties, not able to muster Rs10,000 crore of legitimate funding to get himself out of jail? And what does it say about a country which makes a big deal about bringing black money back from Swiss bank accounts when it has no clear idea of the source of funds of the home-grown but shadowy Sahara business empire? Why is the Sahara group struggling to sell high-profile properties, despite having unprecedented facilities (air-conditioned conference room and video-telecommunication facilities) provided in Tihar jail? 
 
The latest twist in the jail-bail drama around Subrata Roy is that the proposed $2.05 billion buyout of Sahara’s hotels in London and New York by Mirach Capital of the US has fallen through. Sahara has alleged that a letter of guarantee from Bank of America for over $1.05 billion provided by Mirach turned out to be forged. Mirach denies the forgery and claims it is still ready for an outright purchase of Sahara’s three hotel properties.
 

For those who have forgotten, a path-breaking judgement of the Supreme Court, in August 2012, asked two realty companies of the Sahara group to refund Rs24,000 crore collected from investors through an unregulated, debenture-like instrument. But, after paying up just Rs5,120 crore, Sahara resorted to drama and hurled allegations against the regulator through an ill-considered advertisement campaign. It has not been able to prove the existence of even a fraction of the large investor base that it had claimed. The group’s antics angered the apex court; Subrata Roy was held in contempt and sent to jail until the Sahara group deposited Rs10,000 crore, in addition to the money already deposited with the Securities & Exchange Board of India (SEBI). 
 
At the February hearing, the apex court was told by the amicus curiae that there was more to the failed deal than meets the eye. More shocking were reports that a letter, allegedly issued by Bank of America to Mirach, the white-knight-to-be, was forged. More interestingly, Reuters reports SEBI’s apprehension that several of the assets that Sahara claims to own (as proof of its ability to repay investors) may not entirely belong to the group. This, if true, opens a whole new can of worms and suggests benami ownership which, again, our investigation agencies have not got wind of, for decades. SEBI also seems to have discovered the ownership issues only when it seemed likely that Sahara’s assets would be sold to raise the money that has be refunded to investors as per court orders.

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COMMENTS

Dayananda Kamath k

2 years ago

My simple question is why shara has to pay more than 60% of the amount claimed to have been collected by them for bail while Jayalaita and sharda scam detains can get bail for paltry amounts. Justice should be done but it also must appear to have been done. And how far is it right to sell the firms property to the detriment of the interest of stake holders of these properties for providing bail money to sahra, is it not amout to breach of trust. does supreme court wants to be a party to this offence by facilitating the sale.

Mahesh S Bhatt

2 years ago

Nani Palkhiwala's beautiful comments reminds me his quote

"Man's propensity to Earn More than he deserves has always led him to untold miseries."

See Sahara/Shivsena Bros/Ambani's/Birla/Goenkas/Hiranandani/Raheja all have fought/broken empires.

Paradox is their valuations have gone up after the breakage.

There is some

Mahesh

Mahesh S Bhatt

2 years ago

We shall never know as our Politicians are behind him so are most of our ruling lot.
Challenge is too much of Laws have brought total DISORDER instead of Order in House/Nation/International levels too.

Remove taxes we pay 80 plus types of direct /indirect taxes,now we shall have Cleanliness tax from Center too which Modi is proposing.
Government after Government makes taxes poor compliances high fines more more corruption.
Land/Air/Water/Power/Roads/Educatuion/Healthcare/TV/Phone/Food /Services/car/Excise/Income/Customs/Salt/Entertainment/Corporate/Property/Stamp Duty everythings is tax tax tax.

So enjoy Courts have fun goons are unmanagable.Sahara is biggest NBFC with assets claim of few lacs of crore last which I read at Sahara Studio Mumbai office in 2000 was 1.75 lac crores.

We have buildings & buildings lying vacant since 6 years in Dadar/Bombay Central claiming investor money.

NPA 2.4lacs crore Nov 14.Courts shall be more & more busy in times to come.

Celebrate Chill Watch the Economic Drama in India & Global.

Advice weak hearted shouldnot be in the show.

Saare Jahan se Accha Hindutan hamara Hum 147 /181 rank achieve kiye hai abhi improvement bahut baki hai.

Mahesh

Prabhakar V Hegde

2 years ago

Messy messy mess. A detailed invistigation into entire 'Saha' enterprise is needed to understand the whole truth, till then it is only tip of the ice burg!

Vaibhav Dhoka

2 years ago

Sahara is case where all regulators are fooled/hand in glove or party to SCAM.

Kiran Aggarwal

2 years ago

Was there no Fixed Asset checking done under Auditing process??

Sahara story is best case study of
institutional collapse at many levels.

--------------

Richie Rich who is not rich is the person named Mr. Roy

Sreejil Kalathil

2 years ago

It seems they will have to fabricate new plans to bail out subrata roy. Well truth some times takes time to reveal itself. Sahara will also have to wait I guess.

Leslie Menezes

2 years ago

A close unofficial watch on many of these high profile jailbirds may be illuminating as to the actual life enjoyed by them "in jail" and "on record in jail". Why give 10,000 crores when there are the jail staff, investigating staff, and the hirarchy who can be persuaded and some of this money lavisged on them for "better returns".

Aditya Singhal

2 years ago

Couldnt be more appropriate and correct. Who will take the veil off? May be AAP!

Amit Mittal

2 years ago

It is everybody knowledge that all these groups Sahara, kuber, Saradha etc. are/were shady businesses. It has been long that these were enjoying political involvement and patronage. they cared least about the law and ethics. All of these scamsters should meet with an outcome that serve as deterrent for future scamsters.

Last couple of comments seem like the handiwork of social marketing teams hired by sahara.

SuchindranathAiyerS

2 years ago

Apart from an air conditioned conference room and video conference facilities, what else keeps Subrata Roy in jail? Did India's rulers put in that 19 hole Golf Course and Five Star annexe in anticipation of their own incarceration, as well?

Sarika Khanna

2 years ago

How is this possible, if they were not owning the assets, how would they claim to sell it. This is an entirely new story that has come up. I dont think it is possible.

Prachi Sharma

2 years ago

its funny how you are actually agreeing that Mirach had forged documents and then blaming Sahara for calling off the deal. Had they gone ahead with it, you would have probably claimed that they themselves forged the documents?

Aakriti Kaul

2 years ago

Sebi had claimed a lot of things earlier but they havent been able to prove any. Even after several attempts, they havent been able to find the unpaid inestors, they found just 4600 till now as opposed to the crores of investors they had claimed. What about that? Even the SC has asked them to find the investors at the earliest.

Sonali Gupta

2 years ago

This is so strange, Sahara could have easily gone ahead with the Mirach deal but it chose not to after learning of the forged document. Still it is being blamed. Even in these trying times, they did not compromise on their principles. What more do people expect them to do?

The Fad of Financial Literacy
Crores being blown up, while aggrieved investors don’t get redress
 
Financial literacy is as much a fad today as corporate governance was after the global accounting fraud had engulfed top multinationals, at the turn of the century. In the past decade, we have seen regulators pooling investors’ own money (in the form of unclaimed dividends and interest on various financial instruments as well as bank and corporate deposits) into large funds which are spent on conducting financial literacy seminars and issuing advertisements on how to be smart with money. 
 
The amounts available for this exercise are huge; but significantly, investors’ money is being spent without any tangible outcomes. The ministry of corporate affairs (MCA) and the Reserve Bank of India (RBI) have several thousand crores of rupees in their kitty for investor education and protection. Stock exchanges and financial regulators have a few hundred crore rupees each. In most cases, there is no real effort to trace the investors who have not claimed their financial benefits or to ensure that their heirs receive the funds due to them. 
 
RBI had, at least, asked banks to publish the list of bank account-holders who had not claimed their deposits, before the money was transferred into a fund-pool that will be used for investor education. MCA, with over Rs1,000 crore in the Investor Education & Protection Fund (IEPF), has a clunky and rather difficult process for tracing if a person’s unclaimed financial benefits have been transferred to the IEPF. But those who were unable to claim dividends or benefits due to litigation that invariably exceeds seven years are left high and dry. 
 
MCA has unilaterally cancelled the accreditation of all investor groups and prefers to work only with professional institutes under its regulatory ambit. While the IEPF website lists a few financial literacy seminars that have been conducted around the country, there is no clarity about the basis on which it decides to dole out funds. The ministry is now busy setting up a permanent IEPF authority that will give it greater flexibility in spending investors’ money.
 
Meanwhile, financial consumers, who are struggling to get dozens of companies (such as Neesa Leisure, Helios & Matheson, Elder Pharma, Unitech Constructions and Plethico Pharma) are being made to run from pillar to post without redress. The ministry, in fact, scrapped an investor helpline, funded out of the IEPF funds that used to be run by Midas Touch Investor Association without providing any reason for its action. Despite a new government in place, there is no indicator that the ministry will be made accountable for ensuring that these funds are correctly spent. 
 
The key question is: Do endless financial literacy seminars work? Research, based on behavioural economics, shows that the rational economic person does not exist. Most people are simply not wired to understand financial products and tend to translate their experience of buying consumer goods to financial products. 
 
A study published in the Journal Management Science found that almost everybody who has taken a financial literacy class, forgets what has been learnt in 20 months. So, the impact on their future financial behaviour is negligible. An article by Helaine Olen, author of Pound Foolish on Slate.com, has a title that says it all. “Stop trying to make financial literacy happen. It is a noble distraction from actual consumer protection. That is why financial services industry loves it.” We agree. In fact, our regulators love it even more. And, they have figured out a way to get access to a large pool of investors’ own money to spend without any accountability. Regulators use this money power effectively to dole out advertisements to friendly media; those who ask uncomfortable questions are left out. This probably explains why little media attention is focused on the pathetic grievance redress record of financial regulators, despite setting up online redress systems. Moneylife finds that investors with resources manage to have some investigation initiated by filing complaints with the economic offices wing of the police. However, this rarely helps them recover their money. Often, it is more good money spent to recover what is lost.

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COMMENTS

kapil bajaj

2 years ago

Ms Dalal, It's a very good article, but if you were to connect all the dots of your own arguments you'll reach conclusions that will bring into question the very domain you and Moneylife are concerned with, namely the financial sector and, by extension, the 'economy'.

Yes 'Homo economicus' is a myth, but so are all the constructs of economic theories, particularly those of the 'neo-classical economics' that currently rules the world. One can read about the 'Real-World Economics' movement (formerly called post autistic economics) on the Web to get a sense of what I am talking about.

http://www.paecon.net/PAEReview/

The new-liberal theology is, of course, a part of this whole fraud called 'economics'.

Need I say anything about another sub-fraud called 'financialization' that has been used in this neo-liberal era to paralyze not just what is referred to as the 'economy' but the whole of human societies.

You have to be honest, Ms Dalal. No one would know better than you that the so called financial system (including the capital markets) have not been created to serve the real needs of society but to create a smokescreen for transfer of resources to the parasitic elite.
(Currently, it's casino capitalism at its debauched worst while the world burns.)

No one I know explains the gargantuan fraud called the financial system better than Max Keiser.

http://rt.com/shows/keiser-report/

I applaud the element of courage and public-spiritedness in your journalism. However, I can't help noting that Moneylife has been so economical with truth as to have almost no effect in explaining to the public the global empire of falsehood that we all are entrapped in.

Nilesh KAMERKAR

2 years ago

Why investor education is futile . . . http://www.thinkadvisor.com/2014/04/07/i...

MG Warrier

2 years ago

Very pertinent points raised in this article. We have to start worrying about the responsibility of those accept the savings as deposits(called by whatever name) from public. Such deposits could be bank deposits, PF contribution or insurance premium or chit fund deposits. It should be the primary responsibility of those who ‘take’ deposits to account it and appropriate for the purpose for which the deposit is taken. Now that everyone is going to have a bank account, the last rupee payable to the individual should go to that account minimising the possibility of ‘unclaimed deposits’ in any account. Sometime back, Moneylife had published an article by me on the need for a ‘regulator for unclaimed deposits’

Subba Rao

2 years ago

The regulators have most often been caught unawares or have chosen to look the other way when there were anti-consumer products / services / policies of Insurance Companies and AMCs. While it is good to inculcate financial literacy among the masses, it does not absolve the manufacturers of financial products and their respective regulators from the wrongs being perpetrated on the unknowing customer.

B. Yerram Raju

2 years ago

NABARD paints on the buses and trains and organises a few video films and audio films in the name of financial literacy. Still many persons do not know the difference between loans and investments!! Several others do not distinguish between money and wealth.
MCA's ritualistic investor education doles are meant to reach the budget targets and not fulfill the needs of financial literacy and financial education.

Balaji

2 years ago

Its fact regulators are 'lazy' to act (though I would exclude RBI).

manhar kothari

2 years ago

MCA web site has made system for on line investors complaint so complicated that even regular user of computer since last 20 years like me failed to lodge on line complain.
It appears that there is no seriousness to solve the problem of investors.

K G Krupal

2 years ago

Helios & Matheson, Elder Pharma, Plethico Pharma are still trading under B group. Companies which failed to repay deposits, whose cheques for interest are bounced, should be brought under Z group. Investors should delink their investment decision from Stock Market quotations.

REPLY

vishal

In Reply to K G Krupal 2 years ago

when a individual were to get in to trap of dishonoured cheque he can be put behind bars for a petty amount under negotiable instrument act. What about companies issuing cheque and bouncing them? the regulators are more prone to safeguarding the bogus companies than investors.

manhar kothari

In Reply to K G Krupal 2 years ago

plethico Pharma has stooped making interest payment since April 2014 to their FD holders.

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