Anand Rathi, Deena Mehta Absolved In Second Report

A number of brokers whom the first Sebi interim report had mentioned have been exonerated in the second interim report. They include Anand Rathi and Deena Mehta.

While the former had been debarred from acting as director member of the governing body of the Bombay Stock Exchange (BSE) and also told not to undertake any fresh business till further orders, the present report has exonerated him from the charge of having obtained price sensitive information.

The allegation against Rathi was that he had obtained price sensitive information from the surveillance department on March 2, this year. However, based on the enquiry report of Ernst and Young, the report says: "The information as acquired by Rathi from the surveillance department at 3.10 pm was not used for making a profit or avoiding losses".

It says this on the basis of the fact that after that time, his companies executed only two trades on the same date and they were done before the conversation took place.

On Deena Mehta, the report says the objective was to find out if her broking entities benefited by overhearing the conversation of Rathi with the surveillance department, since she was present in the room. The report says: "There was no evidence to establish that the broking firm had used the information for the benefit of Deena Mehta, her firms or clients."

In the case of several brokers connected with the CSE, the report has left the onus on the exchange to initiate any action to recover costs. It says in the case of defaults in pay-ins in settlements 148, 149 and 150 on March 8, March 15 and March 22, 2001, respectively, Sebi has investigated four entities of the Singhania Group, four Poddar group companies four Ajay Kayan group, and two Biyani Group companies who defaulted in making their pay-ins.

The report has noted that there was building up of large concentrated position by Singhania group in a few scripts, mainly HFCL and DSQ. Non-compliance of the Sebi circular by the CSE benefited the Singhania group, and the crystallised delivery positions of the group pertaining to settlement 148 which ended on March 1, 2001, amounting to Rs 150 crore in the exposure of the next settlement, the report said.

It said: "On a review of the margin payments made by the Singhania group vis-a-vis the market positions undertaken by the group, it was observed that the Singhania group was able to avoid margins and violate exposure limits prescribed as per Sebi circulars mainly due to weak risk management and surveillence system of CSE".

Similarly, in the case of the Poddar group companies, non-compliance of the Sebi circulars allowed the entities to continue with their total exposure of Rs 75.87 crore after their margin liability exceeded the total amount of capital deposited by them with the exchange, it said.

On Damani and Shailesh Shah groups, it says there have been no complaints of additional irregularities in their functioning, since the interim report was submitted which had charged them with concerted selling. It says, since the DCA is conducting an enquiry, the regulator will await its findings to ascertain if any violations of securities transactions have been indulged in by these groups.