Intelligence Bureau tracks active deals of Ketan Parekh; tells finance ministry. Why is SEBI inactive?

Ketan Parekh is trading in dozens of stocks, according monthly intelligence reports. Top ministry officials have been getting these reports regularly. But why are they sitting idly, and why is SEBI keeping mum?

Ketan Parekh has been banned from trading in securities from December 2003 till 2017, but by all accounts Mr Parekh has been very active in the market all these years.

Most amazingly, the government's own intelligence wing is regularly tracking his trades and sending the reports to senior-most government officials. These reports are drawn up every month and sent to SS Menon, national security advisor; TKA Nair, principal secretary to the prime minister; KM Chandrashekhar, cabinet secretary; GK Pillai, secretary, ministry of home affairs; and Ashok Chawla, secretary, finance ministry.

Strangely, there has been no regulatory action against Mr Parekh so far, even after his involvement has been widely reported by the media. This raises the question, why top officials of this country who have enormous powers to investigate and harass small businesses and even tax-payers who are senior citizens, are so benign about Mr Parekh's illegal trading even when they are being briefed every month about his enormous purchases and sales?

Another equally important question is whether the market regulator, Securities and Exchange Board of India (SEBI) knows about these activities? Moneylife asked SEBI whether it has been briefed about Mr Parekh's activities, but has not received any reply so far. It would be stunning indeed if all the top officials and the regulator maintain a don't-hear-evil-don't-see-evil attitude, even as they sermonise about what is ethical and moral on various issues in the securities market.

We learn from Intelligence Bureau sources that their monthly briefing reports routinely reach the regulators in some form. The intelligence reports a few months ago documented that "using various front entities" Mr Parekh was active in Orchid Chemicals, GMR Infrastructure, Cairn India, Deccan Chronicle, Reliance Industries, Punj Lloyd, India Bulls Real Estate, Pipavav Shipyard, MVL, Amtek Auto, Hindustan Oil Exploration Company, Camson Biotechnologies, Crew Bos Products, UCO Bank, East India Hotels, State Bank of India, OCL India, Kemrock Industries, Tatia Global Ventures and JSW Steel. Further, KP has apparently "sold his holdings in HPCL and BPCL" in August.

Interestingly, Mr Parekh was also supposedly active in SKS Microfinance, "having taken up the share price from Rs850 to around Rs1,100." The report also adds that "KP using his Kolkata-based associate, Ashok Poddar, held a big position (5-6 lakh shares) in Parsvanath Developers. The report also informs the top government officials that "associates of Mr Parekh, such as Dinesh Singhania and Raj Aggarwal, contemplated modalities for IPOs, wherein cartel members would secure 50% of IPO proceeds from promoters of unknown or fringe companies. In this context, the IPO of Aster Silicates was discussed." Apparently, Mr Parekh is using a Chennai-based broking firm, Shri Ram Insight Share Brokers for his trading.

According to the reports, associates of Mr Parekh were involved in manipulating the Microsec IPO, both in its pre- and post-listing stages. "The gameplan included pre-listing short selling at Rs36 in the grey market, multiple retail and HNI applications through proxies, benami demat accounts and instant selling of the allotment on the day of listing to keep the price below Rs34 levels. Anticipating panic-selling by regular shareholders, the cartel members proposed to mop up shares and subsequently orchestrate a sustained hike through circular trading. Further, the cartel was also involved in the IPO grey market relating to Eros International Media, VA Tech Wabag and Carrier Point Infosystems."

A few months ago, Mr Parekh also planned to buy 60 million shares of Amtek Auto, alternately on the National Stock Exchange and the Bombay Stock Exchange. In June, the intelligence sleuths found Mr Parekh active on the counters of Dish TV, Piramal Healthcare, Pipavav Shipyard and Housing Development Finance Corporation.

Interestingly, Mr Parekh and his associates "were involved in market operations to raise funds in Temptation Foods. The plan included a cash transfer of Rs3.5 crore from one associate (DS) to another (GM) in return for which, GM was to issue a cheque worth one crore to Temptation Foods as application money for 14 lakh shares. While the normal preferential allotment of 14 lakh shares was to be at Rs36 per share, these were to be given at Rs30 per share to GM. Subsequently, KP and associates planned to hike up the shares of Temptation Foods, with the understanding that they would receive 50% of the profit. In the event of a loss, the promoter was expected to make good the losses by providing cash to GM through DS."

It may be recalled that Vinit Kumar, the present owner of Temptation Foods, was recently identified as being an ally of home ministry official Ravi Inder Singh, who was arrested for leaking out sensitive information to companies, and which also led to further revelations in the telecom scam. Vinit Kumar is said to have played a big role in the scandal. According to a report in the Mumbai Mirror, Mr Kumar was the go-between who would take information from Mr Singh to corporate houses, and in return give him cash and supply him with prostitutes. He is widely suspected to have strong links with Mr Parekh, the Mumbai Mirror report says.

When the Intelligence Bureau reports about Mr Parekh's activities are so detailed, the regulator's inability to check his market manipulation can only be deliberate. - Additional research by Sanket Dhanorkar

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    COMMENTS

    MUNNA JINDAL

    9 years ago

    NO MORAL IN INDIA ALONG WITH SEBI , NSE, BSE & ALL SENIOR EXECUTIVES.
    SMALL INVESTORS ARE SUFFERING DUE TO THIS.

    Salam

    9 years ago

    nice events. congrates...


    Rgds,
    Salam

    Tushar Choksi

    9 years ago

    SEBI is big by name and small by action.Now one wonders if intelligence agencies were tracking this market maniuplation in stocks what sebi was doing?Its clear that sebi is in the eye of suspicion but the top officials have always got away inspite of colluding with market operators.Its a sorry state of affairs that so called messiah of small investor Mr. Bhave is doing all the wrong things.One can only pray that if government agencies cant punish the culprits ,god will.

    Biju Pandey

    9 years ago

    What about Axis Bank ? Do you think it went up on the basis of its fundamentals........ sorry please check out the insider story with the employees.

    The main aim of taking over ENAM is to show inflated fee income and to present the rosy picture to investors.

    Employees are unhappy with the new management and putting the papers and the bank is not relieving them and creating unnecessary hurdles and harassment, which is against the labour laws and human right

    Right time to exit or you will see one more Satyam and GTB.



    r rajan

    9 years ago

    the named operators hv not only booked profits on long positions but R short on the market.It is the unsuspecting small speculators that R taken to the laundry.Many F O cos.with good mgts R quoting @ P/E ratios of 3-5.e.g.3 i Info,FSL etc.While the DII s R supporting Infy,TCS etc @ P/E ratios of 30 + small speculators R getting butchered in fundamentally sound midcaps.



    SUBHASH MEHTA

    9 years ago

    After all SEBI is a body of 'poor' govt. officers/officials. Some of them may need money for not taking actions on some petty items like this.

    somesh

    9 years ago

    SEBI hardly has nay good investigating officers under its wings, only a bunch of fat salary eating officers with no experience in investigation calling thmselves regulators and landing at the plum post of SEBI with blessings of their Godfathers with hardly any core competence. You cannot exopect any investigation worth its slat from these people.

    saraf

    9 years ago

    Please let CBI investigate other scams and appoint CVC , vigilance and police(cb-cid) to look after sebi issues (with free hand no person to invene) specially on movements of Top Officials, including Directors, WTM(Whole time members), Ed, CGM,DGM etc.

    sana

    9 years ago

    read

    Saee

    9 years ago

    There is no point in discussing these issues after the even happend.

    Just read the first page of honestadviser.com you will get all answers to this discussions

    Saee

    REPLY

    SUBHASH MEHTA

    In Reply to Saee 9 years ago

    Yes, there is no point to beat the earth after passing of snake. (Saanp nikel jane ke baad lakir pitna theek nahin hai). But I think that there is no tool available through which investor can know before happening.

    Pantulu

    9 years ago

    I have been regularly commenting that the present system helps only manipulators. Common people suffer because they cannot know what these manipulators are upto. The only soiution lies in changing the system by linking share value to the performance of the concerned organization which is not the case at present. The value will go up when the performance improves.Those who want the present system to continue evidently do not like transparency. Change does not suit manipulators .

    girish

    9 years ago

    Can we ask SEBI, before purchasing each and every shares!

    Niraj

    9 years ago

    Do you think that Market is or it should running only on fundamentals? Sensex will be @ 8000 then & all FIIs will fly away fast.

    MITESH SHAH

    9 years ago

    CBI NEEDS TO EVEN INVESTIGATE SEBI'S ACTIVITIES BCOZ SEBI IS BIASED TOWARDS SOME INVESTORS OR MANIPULATORS OR EVEN FUND MANAGERS WHO ARE HAND IN GLOVES WITH ALL THOSE INVOLVED - WHICH COMMON INVESTORS CAN NEVER UNDERSTAND.

    THE NUMBER OF SCAMS WITHIN STOCK MARKETS & OUTSIDE HAVE SUDDENLY COME UP IS IN INFINITY.

    WHERE WILL ALL THIS STOP ONCE & FOR ALL ? & WHO WILL ADDRESS INVESTORS OF MANIPULATED COS. OTHER THEN PROMOTERS OF THE CO. BCOZ THEY COME ON T.V. CHANNELS WHICH DOES NOTR SERVE INVESTORS PURPOSE BUT THEIR OWN. SO , I THINK INSTEAD OF CLARIFICATION FROM SEBI , NO PROMOTER OF ANY CO. BE ALLOWED TO ADDRESS INVESTORS UNLESS ITS BEING CLEARED BY SEBI / FM & PM .

    WHY INVESTORS ARE ONLY ALLOWED TO BURN THEIR FINGERS ? WHY PROMOTERS OF SO CALLED MANIPULATED COS. FINED THEIR ENTIRE WEALTH FOR ANY MANIPULATION WITH INVESTORS MONEY ? PLEASE ANSWER THIS. IF THERE IS NO ANSWER TO THIS - INVESTORS WOULD RIGHTLY TAKE THIS AS ORCHESTRETED BY POLITICIANS / PROMOTOTERS & EVEN CAPITAL MARKET REGULATORS - WITHOUT WHOM ALL THIS SYDICATED SCAMS CANNOT SURFACE.

    REPLY

    rajesh

    In Reply to MITESH SHAH 9 years ago

    I fully agree to your point-Mr bhave and his gang members should be inquired by CBI for all their acts and omissions and corrupt practices-if Mr Raja can be raided then why to spare Mr Bhave who should be spared-he is culprit of even more bigger scam because he is in nexus with lot of operators and he is helping FIIs to buy at low cost of good co shares by killing domestic institutions-indian investors have suffered so much due to SEBI actions that he is gulty of so big crime that he should be hanged in public place-

    Chandresh Shah

    9 years ago

    Next in line would be the white collared Fund Managers, who Warehouse the stock & then purchase them in their Fund, the Suresh jajoo is known to have connections & front men of Madhu kela, like they did in stride, or like TV commentatorUdayan Mukherjee of CNBC, who paid a Advance Tax of JUST 6 crs Why haven't these come to the Headlines as yet?????

    SEBI makes unusual call against broker

    Finding stock broker Deepak Jhunjhunwala guilty of indulging in price rigging and manipulation in Twenty First Century (India), market regulator bars him from taking up any new assignment for a month; will not clarify what this means

    In an unusual order against a stock broker, the Securities and Exchange Board of India (SEBI) has banned broker Deepak Jhunjhunwala from taking up "any new assignment" for a period of one month for indulging in price rigging and manipulation of shares of Twenty First Century (India) Limited (TFC).

    The SEBI investigation has found that Mr Jhunjhunwala had indulged in various cross-deals while trading for his clients, which created artificial volume and price rise in the scrip of TFC. However, the market regulator has failed to clarify the meaning of "new assignment" in its order. After all, Jhunjhunwala seems to run a brokerage business and does not appear to be an employer or a consultant.

    Normally, a broker found guilty of stock price manipulation and other such unfair trade practices is banned from undertaking any trading activity for a certain period of time. However, this order to abstain from undertaking any new assignment is a rare and confusing call from the regulator. Moneylife sent an email query to SEBI seeking clarification on the matter, but received no reply till the time of writing.

    SEBI conducted investigations regarding buying, selling and dealing in the shares of TFC from November 2001 to April 2002. SEBI investigations revealed that there was a significant rise in both the price and volume of the scrip of TFC during this period. It was trading at Rs2.50 in November 2001 and went up to Rs53 on 12 January 2002, a massive jump of about 2000% in two months! Subsequently, the price came down to Rs3.50 on 30 April 2002. SEBI found that the rise in price of the stock was not supported by any improvement in the fundamentals or any corporate action by TFC.

    The investigation further revealed that the trading was concentrated between top 10 brokers who had the scrip. Data provided by CSE, revealed that the trades were structured in nature and the brokers trading in the scrip were engaged in cross-deals for their clients. These cross-deals were about 90% to 97% of the total trades entered by these brokers, among them Deepak Jhunjhunwala.

    Based on these findings, SEBI initiated inquiry proceedings against Deepak Jhunjunwala under regulation 5(1) of the inquiry regulations, through an order on 11 March 2008. The inquiry officer submitted his report recommending a prohibition to take up any new assignment for a period of one month to Mr Jhunjhunwala for violating the provisions of regulation 4(a) and (d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995. The broker apparently admitted to having encouraged the sale and purchase of securities with the object of generating brokerage.

    Looking at the facts and circumstances of the case, SEBI found that "Mr Jhunjhunwala had dealt in the scrip of TFC in a manner detrimental to interest of investors. Such acts may threaten the market integrity and orderly development of the market and call for regulatory intervention to protect the interest of investors."
     

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    COMMENTS

    Sushil Maheshwari

    9 years ago

    The rigging of TFC happened a decade back in 2001-02. Sebi investigation took almost 10 years to find the manipulation. What about the small investors who had probably lost their money in this scip due to the price rigging. Will SEBI compensate the loosers or ask the broker to compensate them. If not what is the purpose of putting a ban for a month.

    Now, SEBI jumps on the UID bandwagon

    The stock market regulator is working on a new concept based on the UID, which is being issued to 60 crore ‘poor’ Indians. This new proposal is somewhat surprising, as not so long ago the SEBI chief was lecturing mutual funds not to target the poor

    Nandan Nilekani, the head of the Unique Identification Authority of India (UIDAI), has continuously maintained that obtaining the biometrics-based unique identification (UID) would be voluntary for Indians. This promise of 'voluntary enrolment' silenced most privacy advocates who argued that UID is a serious breach of privacy and that the biometric databases are unsafe.

    Now it seems that the UIDAI may be trying some backdoor methods to make the identification registration mandatory. At the weekend, Securities and Exchange Board of India (SEBI) chief CB Bhave said in a speech that the market regulator is working on a new concept of operations based on the unique identification number (UIDN). UIDN, or Aadhaar, is the ambitious project of the UIDAI which, it is estimated, will cost the public exchequer about Rs45,000 crore over five years.

    But this is not the first time that SEBI has tried to enforce some identification for investors. The market regulator discontinued it's much-touted 'market participant identification number' (MAPIN) scheme in June-July 2005 after a six-member committee, appointed to re-examine the use, structure and feasibility of the MAPIN database-bowing to popular opinion-recommended an end to biometric identification for investors. Mr Bhave was then heading the National Securities Depository Ltd (NSDL) and was one of the members who left the committee before it could draft and submit a report. Mr Bhave was a big supporter of MAPIN and NSDL would have been a big beneficiary.

    MAPIN registered fingerprints along with a photograph. Many retail investors believed that the use of fingerprints and photographs (used worldwide for identification of criminals) would be a punishment for honest investors, as no trickster would be so stupid as to undertake fraudulent transactions on his own ID. The other factor was that actual trading, at the time, did not involve biometrics and there was no way of verifying the fingerprints and photograph of an investor.
    Besides, there were other avenues like depository accounts, brokers, permanent account number (PAN) and bank account numbers, available to the regulators to track an investor and his investments.

    In the first round of MAPIN, the stock market regulator issued about 4,00,000 UIDs, mostly to senior officials of various companies, institutions and brokerages, at a charge of Rs300 per ID.

    Today, it's the same story with Aadhaar, or UIDN, which is to be issued to about 60 crore residents in India. Everyone, whether it is Nandan Nilekani or even the prime minister, believe that this will help improve the public distribution system (PDS) and that the UID will help to ensure that the poor would be able to receive food grain, which otherwise gets diverted in transit from government warehouses to PDS shops. (Read:  http://www.moneylife.in/article/78/8567.html). This would mean that the poor would be given the Aadhaar number in order to get regular food and other social security benefits. Now if, as Mr Nilekani says, Aadhaar is not mandatory, about half of the country's population would be left out of the UID process. (Read: UID = more 'consumers', admits Nilekani http://www.moneylife.in/article/78/11574.html)

    But SEBI wants to work out a solution based on the UID, so that the poor can also turn retail participant in the markets. Indeed, a noble idea. Unfortunately, the SEBI chief doesn't really believe so.

    In June, addressing a mutual fund summit, Mr Bhave said, "Financial inclusion is a noble goal and everyone should be working towards achieving it, but one must keep in mind the target customer. A person whose lifetime savings is a mere Rs50,000 can't afford to invest in mutual funds. If the market crashes tomorrow, he cannot take that kind of risk. You will only give him what the net asset value (NAV) is at that particular time."

    What applies to mutual funds must also be true for the stock market. Still, the SEBI chief is proposing to use the UID database, expecting the 'poor' to turn investors.

    According to an activist, Aadhaar is a blind endorsement of Professor Coimbatore Krishnarao (CK) Prahalad's 'Theory of Marketing to the Bottom of the Pyramid', which in India's case is 60 crore people living below the poverty line; would-be consumers who corporations wish to target in order to improve their bottom line. "It's an idea in conflict, because the target population for this mega-marketing adventure are consumers who cannot afford three square meals a day, let alone avail of goods and services aimed at them by corporations," the activist said.

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    COMMENTS

    Keshav B Bhat

    9 years ago

    dear All,
    in Indian mythology there is one comunity called "RAKSHASA's"
    I think now SEBI is full of them!
    May be someday GOD will come to risk us from these people
    Keshav B Bhat

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