SCAMS & SCRUTINY IN

THE INDIAN
SECURITIES MARKET
Posted on March 14, 2013 by PRABHASHAGARWALLeave a comment
Introduction: The vision of SEBI is to be the most dynamic and respected
regulator globally.
Website of Securities and Exchange Board of India
(SEBI), http://www.sebi.gov.in.
We have to ensure that there are no issues involving investor interest. We
have to watch out for that. I am looking at SEBI to be a benchmark for the
rest of the world. 1
GN Bajpai, Chairman, SEBI.
SEBI has become like a programmed watchdog. The robbery takes place
right under its nose but it barks only the next morning when its owner (the
Ministry of Finance) asks it to do so. 2
Sujay Marathi, Journalist, http://www.mouthshut.com.
These are the words or the extracts of some of the eminent personalities in
the country. They visualise SEBI as the stock market regulator which caters
to all the Stock market needs and take care that nothing goes wrong with the
market and the investors.
Generally formed with the motive of investor protection the main
responsibility of SEBI is to look into the nitty- gritties of the stock market and
save the investors from the crooked brokers whose sole motive is the earn
money at the cost of investor investment.
The SEBI ACT 1992 has been exhaustively defined and explained where the
SEBI makes an endeavour to fill in the lacuna and not leave a single room or
a space for the market makers or the financial institutions to carry out any of
the unhealthy practices.
This is a continuous process, because SEBI has been trying to make itself
well equipped and trying to gauge at the situations from the crooked
brokers or the price rigger point of view.

Recent cases of Front Running or the Price Rigging have been reported in the
market after the big scams of Harshad Mehta and Ketan Parikh.
There is always a debate among the intellectuals regarding Why did this
scam happen? How did this happen? Why was it allowed to happen?
Lets look into the Broader perspective of these issues and try to analyse the
crooked brokers point of view.
Volatility is of course a result of the structure of Indias financial markets.
Markets in developing countries like India are thin or shallow in at least three
senses. First, only stocks of a few companies are actively traded in the
market. Second, of these stocks there is only a small proportion that is
routinely available for trading, with the rest being held by promoters, the
financial institutions and others interested in corporate control or influence.
And, third the number of players trading these stocks are also few. According
to a late 1990s Report of the SEBIs Committee on Market Making, The
number of shares listed on the BSE since 1994 has remained almost around
5800 taking into account delisting and new listing. While the number of listed
shares remained constant, the aggregate trading volume on the exchange
increased significantly. For example, the average daily turnover, which was
around Rs.500 crore in January 1994 increased to Rs.1000 crores in August
1998. But, despite this increase in turnover, there has not been a
commensurate increase in the number of actively traded shares. On the
contrary, the number of shares not traded even once in a month on the BSE
has increased from 2199 shares in January 1997 to 4311 shares in July
1998. The net impact is that speculation and volatility are essential features
of such markets.
These characteristics of the market changed with the stock scam of the early
1990s, which saw speculative transactions in a wide range of shares,
including new issues of relatively unknown companies. At one point in time,
virtually any company could list itself and expect its primary share of offering
to be oversubscribed. Further, shares that were actively traded could be
purchased in relatively small lots and offered returns not so much in the form
of dividends but through capital gains. This was when a number of small
investors shifted out of bank deposits as their principal financial asset, to
garner much higher returns from stock market investments. The entry of the
small investor had two consequences. First, since such investors were driven
by market analysis purveyed through the media and operated in herd-like
fashion, wide movements in share prices, most often in the upward direction,
was common. Second, the Sensex, while indicative of movements of leading
shares, did not fully capture market activity. All this, however, came to an
end when the scam responsible for driving the market to its frenzied heights

could not be sustained. The market collapsed and a number of small

investors, who bought close to the peak, suffered losses.
The consequence of that experience was two-fold. It resulted in a sharp
decline in the direct participation of small investors in the market. To the
extent they stayed, it was in the form of investments in mutual funds set up
by the institutions. This also meant that principal buyers were the institutions
who were choosy about the kind of shares they acquired. As a result, the
market for initial public offerings dwindled and the secondary market once
again came to dominate stock market activity.
Though similar to the scenario of the late-1980s, this situation was not a
return to the past, when the domestic financial institutions dominated the
market. Policy changes in the interim had altered the structure of the
markets in one significant way. As part of its policy of financial liberalisation,
the government decided in 1993 to permit foreign institutional investors
(FIIs) to make portfolio investments in Indias stock markets. In search of new
opportunities to diversify their portfolios and hedge against risk, such FIIs
soon discovered India as one more developing-country, emerging market.
There were elements of both similarity and difference between the FIIs and
the domestic financial institutions. The similarity was that they too were
choosy about the shares they held, and concentrated much of their
investments in leading shares despite repeated statements by observers that
the FIIs are looking to diversify into equity of less well known and even
unlisted companies. The difference lay in two features that influenced the
investment strategy of the FIIs much more than the domestic financial
institutions: at any point of time, decisions with regard to the quantum of
investment in particular markets were determined by global factors, such the
opportunities and risks in other competing markets; and, once investments
were made, the objective was to maximise capital gains in the short run.
Given the huge funds at their disposal, even relatively small investments by
the FIIs meant big money for stock markets in countries like India. That
influence was visible even in 1994-95, when the ratio of FII investment to
market capitalisation (1.1 per cent) was smaller than that for the domestic
financial institutions (6.6 per cent). Hence, at the margin the impact of the
FIIs on domestic markets are much greater than suggested by the share in
capitalisation. With such significant operators in the market whose trading
activity is driven by global considerations, medium-term swings in either
direction were to be expected. Developments like the Mexican debacle, the
return of Hong Kong to China, the collapse of Southeast Asian currencies or
political uncertainty in India, result in a reordering of FII investment priorities
in different emerging markets, with effects on the volume of gross and net FII
purchases for a period of time. There is reason to believe that the medium

term swings in Indian markets in recent times have been significantly

affected by such global influences on FII investments.
Further, FII investments are also motivated by a desire to trade actively in
pursuit of capital gains. This has forced the domestic financial institutions to
take note and respond. As a result their trading activity has also increased
substantially. This new revival in trading is however in relatively large lots
and is confined to the shares of dominant companies. This has two
implications. First, it increases the volatility of the Sensex. Second,
movements in the Sensex do not capture the state of trading in the market
as a whole, and conceal the fact that segments of the market like that for
primary issues have virtually dried up.
Liberalisation and the entry of FIIs affect market behaviour through their
implications for economic policy as well. Foreign Institutional Investors (FIIs),
whose exposure in Indian markets is an extremely small share of their
international portfolio, pursue international investment strategies that could
involve periodically investing in or withdrawing from India. This forces
governments, keen to have them constantly making net purchases and
driving markets upwards, to bend over backwards in appeasing them. A
corollary of this influence of the FIIs is that any market player who is able to
mobilize a significant sum of capital and is willing to risk it in investments in
the market can be a major influence on market performance.
HARSHAD MEHTA THE BIG BULL OF THE STOCK MARKET
A Mastermind. A Big Bull in the Market. The person who jolted the whole
Stock Market and left the investors, broker as well as the regulators in a state
of Paranoia.
With his brilliance, his quick wittiness as well as his Gujarati Back ground he
blew the market off the base without giving a chance to the whistleblowers
or the media to sneak peek what was going on and how was it being
managed.
Harshad Mehta grew from rags to riches and so rich that he owned a big
house in an elite locality in Mumbai as well as he drove an expensive sedan.
His mastermind caused a loss to the tune of Rs. 5000 Crores to the market.
This loss was not only a loss for the stock market but the banking system too
was moved aback with his game plans and their executions.

SEBI, RBI and all the other regulators woke up when this scam was exposed
by TOI journalist Sucheta Dalal. She exposed Harshad Mehta and his allied
men to the media and blaming them of causing an unduly price rigging in
the market and creating a bubble in the market which was a hypothetical
bubble.
HIS JOURNEY:
Harshad Shantilal Mehta was born on 29 July 1953, at Paneli Moti, Rajkot
district, in a Gujarati Jain family. His early childhood was spent in Kandivali,
Mumbai, where his father was a small-time businessman. Later, the family
moved to Raipur, Chattisgarh. Mehta studied in s.s kalibadi Higher Secondary
School, in Raipur.
He briefly worked for New India Assurance Company, until he decided to
trade in the Stock Market of BSE and [NSE].
HIS START:
By 1990, Mehta rose to prominence in the stock market. He was buying
shares heavily. The shares which attracted attention were those of
Associated Cement Company (ACC) The price of ACC was bid up to Rs.
10,000. When asked, he used the replacement cost theory as an explanation.
He was alleged to have an expensive lifestyle. Through the second half of
1991 Mehta had earned the nickname of the Big Bull, because he was said
to have started the bull run.
Mehta made a brief comeback as a stock market guru, giving tips on his own
website as well as a weekly newspaper column.
HOW DID HE DO IT?
A very well planned and thought of process was initiated by this mastermind.
The manner in which he conducted the whole scam was not at all illegal and
was never noticed by the brokers and the government until and unless
Harshad Mehtas immensely accumulated wealth was being displayed in the
public with his 10400 sq ft house in Mumbai and his fleet of cars.
As discussed by the market experts his scam was untraceable and was not
anything he was doing against the law.
Instead what was being done was a result of the lacuna prevailing in the
judicial system or the regulatory environment, which caused this debacle.

This step by step immense accumulation of wealth and suddenly shoot up of

the market prices of few scrips in a span of months was what media and the
investors were flabbergasted looking at.
Media started being vigilant about the activities of Harshad Mehta and finally
it was Sucheta Dalal from the Times of India, who could crack the code and
unearthed the route to doom for the investors, the market and the banks.
The heavy involvement of all these people whether as mere spectators or as
initiators or partners had ruined the market, which lead to the wake of SEBI
under The SEBI Act 1992.
The Route taken by the Master Mind and the thug was as under
In the early 1990s, the banks in India had to maintain a particular amount of
their deposits in government bonds. This ratio was called SLR ( Statutory
Liquidity Ratio).Each bank had to submit a detailed sheet of its balance at
the end of the day and also show that there was a sufficient amount
invested in government bonds. Now, the government decided that the banks
need not show their details on each day, they need to do it only on Fridays.
Also, there was an extra clause that said that the average %age of bond
holdings over the week needs to be above the SLR but the daily %age need
not be so. That meant that banks would sell bonds in the earlier part of the
week and then buy bonds back at the end of the week. The capital freed in
the starting of the week could then be invested. Now, at the end of the week
many banks would be desperate to buy bonds back. This is where the broker
comes in. The broker knew which bank had more bonds(called plus) and
which has less than the required amount (called short). He then acts as the
middleman between the two banks. Harshad Mehta was one such broker. He
worked as a middle man between many banks for a long time and gained the
trust of the banks senior management. Lets say that there are two banks A
(short) and B (plus). Now what Harshad Mehta did was that he told the
banker at A that he was dealing with many banks and hence did not know
who would he deal in the end with. So he said that the bank should write the
cheque in his name rather than the other bank (which was forbidden by law),
so that he could make the payment to whichever bank was required. Since
he was a trusted broker, the banks agreed. Then, going back to the example
of bank A and B, he took the money from A and went to B and said that he
would pay the money on the next day to B but he needed the bonds right
now (for A). But he offered a 15 %return for bank B for the one day
extension. Bank B readily agreed with this since it was getting such a nice
return Now since Harshad Mehta was dealing with many banks at the same
time he could then keep some capital with him at all times. For eg. He takes
money from A on Monday and tells B that hell pay on Tuesday, then he takes

money from C on Tuesday and tells D that hell pay on Wednesday and the
money he gets from C is paid to B and as a result he has some working
capital with him at all times if this goes on with other banks throughout the
week. The banks at that time were not allowed to invest in the equity
markets. Harshad Mehta had very cleverly squeezed some capital out of the
banking system. This capital he invested in the stock market and managed
to stoke a massive boom. The shares which attracted his attention were:
Associated Cement Co. (ACC),
Apollo Tyres,
Reliance,
Tata Iron and Steel Co. ( TISCO),
BPL,
Sterlite,
Videocon
He took the price of ACC from 200 to 9000.Thats an increase of 4400%!!!The
market went up like crazy and the bulls were on a mad run. Since he had to
book profits in the end, the day he sold was the day when the market
crashed. The same day Vijaya Bank chairman committed suicide by jumping
from the top of the banks office. The chairman knew that when it would
become public that he had written cheques in the name of Mehta, he would
be dead meat. One rather unknown fact about this scam is that there wasa
very important player in this scam who managed to keep a very low profile.
That man was Nimesh Shah. He was just as involved as Harshad Mehta but
he knew how keep outof the hands of the law. Nimesh Shah still deals in the
stock market and is known to be a heavy player. Harshad Mehta is now dead.
It is rumoured that when he died, he still had10% of ACC shares with him
The above flow chart mentions the way in which the scam was carried out.
The pictorial description are numbered to explain the events chronologically.
After Harshad Mehta invested the Banks money in the stock market to rig
the price, he use to push the stock prices to an unimaginable level. When the

Bonds or the Bank receipts maturity date came near, he used to sell the
scrips in which he had invested his money at a premium rate.
Then the sales receipts were used to pay off the Bank B.
This was how the whole transaction was routed.This scam led to a loss of Rs.
5000 crores to the market.
AFTER EFFECTS OF THE SCAM:
The scam left a big scar on the market. Such big or deep was the scar that it
made the government decide upon a regulator to monitor such kind of
transactions and safeguard the investors from the wrath of crooked brokers.
The Stock Market had crashed. The banks involved in the scam were under
the scrutiny. There were banks who became extinct due to the level of fraud.
Bank Chiefs were committing suicide and the the people involved with the
scam with Harshad Mehta were already underground.
It was a daunting task for the government and the SEBI to go after these
scamsters and get them arrested.
Still to this date the police and the regulators are trying to unearth all the
money which had been swindled in the scam.
AND THE SCAMS CONTINUED
KETAN PARIKH PIED PIPER OF DALAL STREET
A former stockbroker based in Mumbai who was convicted in 2008 for being
involved in engineering the technology stocks scam in Indias stock market in
1999-2001. A chartered accountant by training, Parekh comes from a family
of brokers and is currently serving a period of disqualification from trading in
the Indian bourses till 2017.
Ketan Parekh has been accorded with sobriquets such as the Pentafour Bull
and the One Man Army by the countrys national business newspapers, while
the market simply refers to him as KP or associates him with his firm NH
Securities. Parekh is known to have no reluctance in meeting the press. He is
also known to have razor-sharp forecasts on market developments.
KPs family has been engaged as stockbrokers for a significant time. He is
also related to many prominent brokers. Secondly, when Mehta was

operating, the market was still a closed one and was just beginning to
liberalize. It was revealed later that Mehta operated using the money of
other people as his last recourse. Further, Mehta is known to have resorted
to aggressive publicity campaigns whereas KP operates almost clandestinely.
The latter has also been successful at creating stories and selling them
aggressively to institutional investors.
Parekh attracted the attention of market players and they kept track of every
move of Parekh as everything he was laying his hands on was virtually
turning into gold. But the Pentafour Bull still kept a low profile, except when
he hosted a millennium party that was attended by politicians, business
magnates and film stars. And by 1999-2000, as the technology industry
began embracing the entire world, Indias stock markets started showing
signs of hyper-activity as well and this was when KP struck.
Almost everyone, from investment firms which were mostly controlled by
promoters of listed companies to foreign corporate bodies and cooperative
banks were eager to entrust their money with Parekh, which, he in turn used
to inflate stock prices by making his interest obvious. Almost immediately,
stocks of firms such as Visual soft witnessed meteoric rises, from Rs 625 to
Rs 8,448 per unit, while those of Sonata Software were up from Rs 90 to Rs
2,150. However, this fraudulent scheme did not end with price rigging. The
rigged-up stocks needed dumping onto someone in the end and KP used
financial institutions such as the UTI for this.
When companies seek to raise money from the stock market, they take the
help of brokers to back them in raising share prices. KP formed a network of
brokers from smaller bourses such as the Allahabad Stock Exchange and the
Calcutta Stock Exchange. He also used BENAMI or share purchase in the
names of poor people living in Mumbais shanties. KP also had large
borrowings from Global Trust Bank and he rigged up its shares in order to
profit significantly at the time of its merger with UTI Bank. While the actual
amount that came into Parekhs kitty as loan from Global Trust Bank was
reportedly Rs 250 crore, its chairman Ramesh Gelli is known to have
repeatedly asserted that Parekh had received less than Rs 100 crore in
keeping with RBI norms.
Parekh and his associates also secured Rs 1,000-crore as loan from the
Madhavpura Mercantile Co-operative Bank despite RBI regulations that the
maximum amount a broker could get as a loan was Rs15-crore. Hence, it was
clear that KPs mode of operation was to inflate shares of select companies
in collusion with their promoters.

Notably, a day after the presentation of the Union Budget in February 2001,
Parekh appeared to have run out of luck. A team of traders, Shankar Sharma,
Anand Rathi and Nirmal Bang, known as the bear cartel, placed sell orders on
KPs favorite stocks, the so called K-10 stocks, and crushed their inflated
prices. Even the borrowings of KP put together could not rescue his scrips.
The Global Trust Bank and the Madhavpura Cooperative were driven to
bankruptcy as the money they had lent Parekh went into an abyss with his
reportedly favourite K-10 stocks.

HOW WAS THE SCAM EXPOSED?

Ketan Parekhs fraudulent practices were first exposed by veteran columnist
Sucheta Dalal. Suchetas column read, It was yet another black Friday for
the capital market. The BSE sensitive index crashed another 147 points and
the Central Bureau of Investigation (CBI) finally ended Ketan Parekhs twoyear dominance of the market by arresting him in connection with the Bank
of India (BoI) complaint. Many people in the market are not surprised with
Parekhs downfall because his speculative operations were too large, he was
keeping dubious company, and he was dealing in too many shady scrips.
When the prices of select shares started constantly rising, innocent investors
who had bought such shares believing that the market was genuine were
about to stare at huge losses. Soon after the scam was exposed, the prices
of these stocks came down to the fraction of the values at which they had
been bought. When the scam did actually burst, the rigged shares lost their
values so heavily that quite a few people lost their savings. Some banks
including Bank of India also lost significant amounts of money.
Dalal goes on to state that Parekhs scheme was not visible to a layman
given the positive deflection that media had made him a hero while some of
the biggest national dailies had even quoted him profusely on that years
Union Budget. Dalal added that KPs arrest and the uncanny similarity of his
operations to the Harshad Mehta securities scam of 1992 vindicated the
miserable inadequacy of the countrys regulatory system. The Securities
Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) had
remained complacent when the stock bubble was created during the latter
half of 1999 and through 2000 while it had not bothered to take any action
through 2001 when it was ready to burst.
SEBI investigations into Parekhs money laundering affairs revealed that KP
had used bank and promoter funds to manipulate the markets. It then
proceeded with plugging the many loopholes in the market. The trading cycle
was cut short from a week to a day. The carry-forward system in stock
trading called BADLA was banned and operators could trade using this

method. SEBI formally introduced forward trading in the form of exchangetraded derivatives to ensure a well-regulated futures market. It also did away
with broker control over stock exchanges. In KPs case, the SEBI found prima
facie evidence that he had rigged prices in the scrips of Global Trust Bank,
Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer.
Furthermore, the information provided by the RBI to the Joint Parliamentary
Committee (JPC) during the investigation revealed that financial institutions
such as Industrial Development Bank of India (IDBI Bank) and Industrial
Finance Corporation of India (IFCI) had given loans of Rs 1,400 crore to
companies known to be close to Parekh.
Some of the regulatory actions SEBI undertook came under scathing criticism
from some quarters who accused it of still being clueless about its
supervisory duties. Observers said the regulator still continued believing that
its only priority was to prevent a fall in stock prices.
It was rumored that SEBI banned short sales and increased margins creating
a virtual cash market in the process and squeezed turnover to a sixth of the
normal level. It also fired all broker directors from the Bombay Stock
Exchange and Calcutta Stock Exchange and declared the completion of three
controversial settlements of the Kolkata bourse by retaining a sizeable
proportion of the payout of operators who had allegedly tied-up for collusive
deals. Furthermore, SEBI rounded up the bear operators and launched an
inquiry into their alleged short sales.

AFTER EFFECTS OF THE SCAM

Parekhs fraudulent operations motivated the authorities to take necessary
steps that have made made Indias stock markets relatively safer in present
times. He can also be credited for having forced indolent policy-makers to
bring about reforms in the financial system.
According to an Intelligence Bureau report, though disbarred from trading in
the countrys bourses until 2017, is still operating in the markets through
conduits, vindicating Dalal Streets belief that he has never left the market.
The report says that as recently as December 2010, KP has been rallying
behind different stocks and placing some of them at rigged up prices to large
institutions such as the LIC. He is operating through little-known investment
firms, market operators and a following of loyal brokers. KP, who was at the
forefront during the technology shares-led bull run in 1999-2000, is
apparently using front entities such as Orchid Chemicals , GMR
Infrastructure, Cairn India, Deccan Chronicles Holdings, Reliance Industries,

Punj Lloyd, Indiabulls Real Estate, Pipavav Shipyard, Amtek Auto, Hindustan
Oil Exploration, UCO Bank, State Bank of India, EIH and JSW Steel, among
others, to trade in shares.
The report further states that KP has been instrumental in inflating the share
price of SKS Microfinance from Rs850 to Rs1,100 following its listing in
August 2010. He has also rigged IPOs of little known companies by buying
out 50% of the issue in collusion with his Kolkata-based associates. KP and
his associates have also acquired very large positions in petroleum
companies such as ONGC and HPCL, according to the report. An IB official
has further said that KP and his team have revealed to their close associates
that they have insider information on the governments proposal to decontrol
the sale of gas which is expected to raise profit margins of these companies
by about 20%.
ANALYSIS OF SCAMS
Another breath taking thing which came in focus of the public was the
creation of a group in name of Damayanti. This group was mainly set up to
rig the prices of the comodities.
Damayanti group comprised mainly of the following entities, viz. Damayanti
Finvest Pvt.Ltd, CDP Fincapand Leasing Pvt.Ltd, KRN Finvest and
Leasing Pvt.Ltd, Rijuta, Finvest Pvt.Ltd, Ikshu Finvest Pvt.Ltd, Money
Television Industries Ltd. These entities had neither the financial worth nor
the professional expertise to undertake the kind of dealings, but merely
acted as front for Harshad Mehta.
Market Capitalisation of the Listed Companies

Amount in Rs. Cr
Year

BSE (Market
Turnover)

All India Market

Capitalisation
36012

110279

71777

354106

45696

228780

1990-91

1991-92
1992-93

84526

400077

67749

473349

50064

572257

124284

488332

207644

589816

311999

574064

685022

1192064

100032

768863

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01
#As per data accessed from http://www.capitalmarket.com on April 12, 2002.
As per the table mentioned above we can see that the BSE Market turnover
had declines from Rs.71777 crores in the year 1991-92 to Rs.45696 crorec in
the year 1992-93. Simultaneously there was an impact on the Market
capitalisation of the economy during the same year. This was the year when
the Harshad Mehta Scandal was out and the Stock Market Crashed sending
the shock waves across the economy.
Lets Analyse Company Wise Data of some of the companies in which
Harshad Mehta had Invested and whose prices were rigged.
ACC LTD: 500410
Year

Open

High

Low

Close

3,260.00

10,500.00

2,025.00

2,575.00

2,625.00

3,260.00

1,580.00

2,850.00

3,060.00

5,020.00

2,900.00

4,050.00

4,100.00

4,300.00

2,440.00

2,780.00

2,800.00

4,225.00

907

1,190.25

1,210.00

1,800.00

1,010.00

1,386.75

1,150.00

1,185.00

855

855

1,503.00

1,846.00

797

1,032.75

1,100.00

1,100.00

218.5

218.5

1,043.00

2,023.60

155

248.25

147

156.35

93.1

155.1

1992

1993

1994

1995

1996

1997

1998

1998

1999

1999

2000
# AS PER THE DATA ACCESSED FROM www.bseindia.com
APOLLO TYRES 500877
Year

Open

High

Low

Close

173.5

510

130

210

205

223.75

107.5

195

205

250

140

150

145

155

110

145

132.5

202

96

115

179

180

68.25

79.5

123

167.1

56.1

64.6

170

180

170

180

65.2

267

38.1

159.05

161

227

68.25

88.55

1992

1993

1994

1995

1996

1997

1998

1999

1999

2000
# AS PER THE DATA ACCESSED FROM www.bseindia.com
After observing the statistics for the 8 years we draw certain conclusions. As
we observe the High price of ACC Ltd and the Apollo tyres was Rs. 10500.00
and Rs. 510.00 during the year 1992. This is the inflated price of the stock
due to the stock or price rigging during the era of Harshad Mehta.
After the Scam was exposed the price fell down by the following percentage.

ACC Ltd
High Price in 1993-high Price in 1992
High Price in 1992
=3260-10500 x100 = 70% (Approx)
10500
APOLLO TYRES
High Price in 1993-high Price in 1992
High Price in 1992
=223.75-510 x100 = 56.12% (Approx)
510

If we also observe the difference between the High & Low, we would
observe that in case of ACC LTD there is a large margin between the
Open Price and the High Price.
The same observations could be made in the stock price of APOLLO
TYRES.
In the Year 2000, in case of ACC LTD, there has been a substantial drop
in the price of the stock. This is the time when there was again a big
downfall due to Ketan Parikh Scam.
SEBI INTERFERENCE, GUIDELINES AND REGULATIONS
After these scams it was time for the SEBI to step in and monitor the
situation.
Since this was an eye opener for SEBI it had cautiously drafted the
regulations so that there were no such frauds again. But still all the
regulations were not at all perfect. Since this was the first year of SEBI it did
not have a fair idea about the market and was on an establishment mode.
Ketan Parikh debacle incurred after Harshad Mehtas fiasco which proved
that somewhere SEBI was lacking in their approach.
It is believed that the regulators cannot judge the psychology of the crooked
brokers. Its only after something has happened reforms come into being. The
situation was of digging the well in case of fire.

Various reforms and regulations were introduced by the SEBi which shall be
enumerated below.
GUIDELINES
1992

Securities and Exchange Board of India (Merchant Bankers) Rules

1992 (Since Rescinded w.e.f. September 7, 2006)
SEBI (Prohibition of Insider Trading) Regulations 1992.
1993

Securities and Exchange Board of India (Registrars to an Issue and

Share Transfer Agents) Rules, 1993 (Since Rescinded w.e.f. September
7, 2006)
Securities and Exchange Board of India (Appeal to Central
Government) Rules, 1993
Securities and Exchange Board of India (Portfolio Managers) Rules 1992
(Since Rescinded w.e.f. September 7, 2006)
1994 Securities and Exchange Board of India (Bankers to an Issue) Rules,
1994 (Since Rescinded w.e.f. September 7, 2006)
ORDERS
After the scam various orders were issued by Securities & Exchange Board of
India.
These were a kind of immediate measures adopted by the institution.
1. Audits of Accounts of Members
2. Submission of Information
3. Progress Reports on Suggestions
4. Payments of Fees Brokers of expenses.
5. Committee on levy of fees.
6. Submission of Information
7. Computation and Collection of registration fees.
8. Arrears of Listing fees.
9. Restructuring of Exchange Management.
10.
Amendment of SC(R) A 1956 for Coporate Members
11.
Brokers, Sub- Brokers rules & regulations.
12.
Collection of registration fees by the brokers.
13.
Multiple Membership criteria
14.
Inspection of brokers Books
15.
Guidelines for Public Issues

16.
Submission of Daily Reports
17.
Review on the working of the Stock Exchanges
18.
Monitoring & Inspection of the Brokers.
With all these orders and Guidelines it was noticeable that SEBI had now
woken up to these scams and was in a mood to impose the most stringent
measures to curb such further scams in the markets
Conclusion
Still there are some frauds in the markets despite measures by SEBI.
The only hope investors have from SEBI that their money is under their trust,
which they believe is as safe as keeping in a Bank Fixed Deposit.
Later on there were many scams like that of Bhansali and the UTI scam, but
every time the regulator stood up and made regulations to curb any further
scams with a similarity with the previous ones.
If SEBI becomes pro- active and starts thinking like a crooked broker, these
scandals which jolted the whole nation could be avoided and then it could
justify its preamble
to protect the interests of investors in securities and to promote
the development of, and to regulate the securities market and for
matters connected therewith or incidental thereto