share market scam

7/30/2019 share market scam

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KETAN

PAREKH


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WHO KETAN PEREKH IS ???


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Who is He??? Ketan Parekh is a former stock broker from Mumbai,

who was convicted in 2008, for involvement in theIndian stock market manipulation scam in late 1999-2001.

Currently he has been debarred from trading in theIndian stock exchanges till 2017.
http://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Mumbai


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KP is C.A. by profession and used to manage NH Securities started

by his father.

Known for maintaining a low profile, was known as the 'Bombay Bull'

and had connections with movie stars, politicians and even leadinginternational entrepreneurs like Australian media tycoon Kerry

Packer. (KPV Ventures, a $250 million venture capital fund that

invested mainly in new economy companies. )

Profile & Background of scam

:


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The companies in which KPheld stakes or K-10 stocksincluded :-

Amitabh BachchanCorporation Limited(ABCL),

Mukta Arts(Subhash Ghai),

Pritish NandyCommunications

HFCL,

Global Telesystems

(Global),

Zee Telefilms,

Crest Communications,

PentaMedia Graphics

Infosys.

Satyam Computers.

K- 10


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Although KP was a successful broker, he did not havethe money to buy large stakes. According to a report,

12 lakh shares of Global in July 1999 would have costKP around Rs 200 million.

The stake in Infosys would have cost him Rs 50 million, While the Zee and HFCL stakes would have cost Rs 250

million each.

KP borrowed from various companies and banks for thispurpose. His financing methods were fairly simple. Hebought shares when they were trading at low prices andsaw the prices go up in the bull market whilecontinuously trading. When the price was high enough,

he pledged the shares with banks as collateral for funds

And theStory begins


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A small Ahmedabad-based bank, Madhavapura MercantileCooperative Bank (MMCB) was KPs main ally in thescam. KP and his associate started tapping the MMCB forfunds in early 2000.

In December 2000, when KP faced liquidity problem insettlement he used MMCB in two different ways-

o First was the pay order route, where as KP issued cheques drawnon BoI to MMCB, again which MMCB issued pay orders, the payorder discounted at BoI.

o The second route was borrowing from a MMCB branch at Mandvi

(Mumbai) where different companies owned by KP and hisassociates had accounts. KP used 16 such accounts, either directlyor through other broker firms, to obtained funds.


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By Feb 2001, CSE were reduced to an estimated Rs6-7 billion from their initial worth of Rs 12 billion

KP's badla payments of Rs 5-6 billion were not

honored on time for the settlement and about 70

CSE brokers, defaulted on their payments

By mid-March, the value of stocks held by CSE

brokers went down further to around Rs 2.5 - 3

billion


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176 points fall in the sensex on march 1st, 2001

Prior day union budget tabled prompted 177 sensex points

increase.

SEBI launched immediate investigations

SEBI inspected the books of several brokers suspected of

triggering the crash

RBI ordered some banks to furnish data of Capital market

exposure

BSE President Anand Rathis resignation added to

continued downfall of sensex

DEVELOPMENT LEADING

TO KP SCAM


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-March, the value of stocks held by CSE

brokers went down further to around Rs 2.5billion. The CSE brokers started pressurizing

KP for payments. KP again turned to MMCB

to get loans. The outflow of funds fromMMCB had increased considerably form

January 2001. Also, while the earlier loans

to KP were against proper collateral andwith adequate documentation, it was

alleged that this time KP was allowed to

borrow without any security.


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IMPLICATIONS

One of the biggest Fall in BSE -700 points

KP and other traders were banned from

trading for 17 years

Short selling was banned for 6 months.

Badla system was banned

All shares that were put as collaterals shouldbe done so through NSE and BSE.

10% additional deposit Margins.


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Ketan Parekh was arrested by CBI on 30thMarch 2001.

RS. 2000 billion lost

KP released on bail on May 2001All Ketan Parekh had to say was I made

mistakes

The Retail investors were the worst hit

SBI, BOI, PNB had to suffer huge losses

MMCB also suffered huge losses


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CONCLUSION

Documents

share market scam