Sebi Debars 18 Brokers With Harshad Links

The Securities and Exchange Board of India has decided to debar 18 brokers from trading on the capital markets for their role in market manipulation in the BPL, Videocon and Sterlite scrips. The brokers have been charged with acting in a concerted manner for a common group of clients, who have now been identified as a front for scam-tainted broker Harshad Mehta.

Sebi will release two more reports on the functioning of stock exchanges during the period of the payment crisis; the role of Harshad Mehta and his connection with promoters of companies and the bail-out operations for the brokers and prosecution against other parties.

 

``This is the first time we have seen such concerted action. All the brokers did buying, transfer of funds and spot deals for this common set of clients. Further through the 18 brokers, up to 75 per cent of the tradable stock of BPL, 40 per cent for Videocon and 50 per cent for Sterlite was cornered,'' a Sebi official said.

An inquiry will be conducted against 34 brokers in all for their role in the entire price manipulation exercise. It is now learnt that in some cases, brokers had exceeded their exposure limits prescribed for trading.

One of the brokerages identified is Harvest Deal Securities Pvt Ltd, which has BSE vice president and governing board member Rajendra Banthia as its main director.

Banthia will be debarred from further activity until the enquiry is completed.

The brokerages, which include 12 BSE and 6 NSE members, will not be allowed to trade from the next settlement, starting November 2 (on the BSE) and November 4 (on the NSE).

An inquiry will be instituted in each case and a show-cause will be issued against the brokers.

The common set of clients who are accused of fronting for Harshad Mehta are Damyanti Finvest Pvt Ltd, CDP Fincap & Leasing Pvt Ltd, KRN Finvest & Leasing Pvt Ltd, Rijuta Finvest Pvt Ltd, Ikshu Finvest Pvt Ltd, Burlington Finance and Money Television Ind.Ltd. All these firms function from the same office in Nariman Point, Mumbai. The directors of these common clients are Anil and Dinesh Doshi (brothers-in-law of Harshad Mehta), Dilip Shah and Vinod Shah. ``These people have no financial track record nor any expertise to undertake securities transactions. The trading decisions were not made by them and evidence shows that their activities were controlled by Harshad Mehta,'' a Sebi official said. ``The inspection has been the most comprehensive (50 brokers, 15,000-20,000 transactions across exchanges, recording statements of 90-100 market entities) over a period of January-June 1998,'' Sebi senior executive director L K Singhvi said.

The price manipulation exercise gathered storm in April-May, and a set of brokers defaulted later in June after the markets collapsed. The BPL, Sterlite and Videocon stocks jumped sharply in April-May and collapsed after that, with several brokers who had built up huge positions getting trapped.