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Market regulator shifts focus to manipulation, price rigging

Palak Shah  |  Mumbai 

The watchdog has upped the ante on stock manipulators. Under Chairman U K Sinha, the Securities and Exchange Board of India’s (Sebi) number of investigations undertaken on price rigging and Initial Public Offerings (IPO) manipulation have been the highest in the past five years. In fact, investigations on IPO manipulation launched in a single year have been the highest since 1997-98. For the first time, circuit filters were imposed on to curb listing-day volatility.

From recently released statistics, put 73 new cases of market manipulation and price rigging under the scanner between April and December 2011 (he took charge that February). This is 18 per cent higher than in 2010-11. Of these, an inquiry in 14 cases was initiated in IPO manipulation, wherein promoters of seven newly-listed companies came under the scanner for various breaches of law.

However, Sebi’s strike rate has been extremely poor during Sinha's term so far when it comes to completion of probes. The board managed to wind up a probe in only 14 cases between April and December 2011, compared to 82 cases in 2010-11.

Legal experts say this could be partly attributed to a manpower crunch at senior levels and controversies involving two previous wholetime members, which resulted in follow-ups on probes taking a backseat.

Among the past Chairman, G N Bajpai's term saw the highest number of cases being put under investigation and also when a probe in most of these was completed. This was in 2002-05, when securities law was amended after the and Sebi got more teeth to tackle cases of manipulation and insider trading, and powers to impose heavy penalty and initiate criminal proceedings against wrongdoers.

Under Bajpai, Sebi launched investigations in 376 cases and completed a probe in 437 cases, including previous ones. The most controversial case under Bajpai's tenure was that of stock broker Shankar Sharma, indicted by Sebi for "profiting from advance knowledge”. Sharma had challenged the charges. On an average, annually Sebi launched investigations in 125 new cases and completed a probe in 145 cases under Bajpai. Between 2005 and 2008, Sebi launched investigations in 100 cases and completed a probe in 145 annually under then Chairman Inquiry in 300 manipulation, price rigging and insider trading cases, among others, were launched under Damodaran and a probe in 352 cases was completed. Investigation in the IPO scam involving was launched under Damodaran, a highly controversial one.

When was Sebi chairman between 2008 and 2010, the board launched and completed its investigation against RIL, deemed the most high profile insider trading case in India so far. It was also under Bhave that Anil Ambani and other high ranking officials of the Reliance ADAG were fined up to Rs 50 crore, the highest fine imposed by Sebi so far. On an average, a probe in 80 cases was completed and an inquiry in 71 cases launched annually under Bhave in three years.

First Published: Thu, June 14 2012. 00:15 IST