INDIA BUSINESS WORLD - MAY - JUNE 2007
The Month that was ...

KETAN PAREKH PLEA REJECTED AGAINST SEBI

Taking a serious view on price manipulation of scrips in the securities market, the Supreme Court dismissed an appeal by tainted stock broker Ketan V Parekh, challenging a Sebi order which had prohibited him from buying and selling or dealing in securities in any manner, directly or indirectly, for 14 years. The apex court also dismissed appeals by his associates who were found guilty of similar offences.

A bench comprising justice SH Kapadia and justice BS Reddy said: "You (Parekh) have been found guilty of manipulating scrips. The evidence is against you. There are firms in which there is clear evidence of manipulation." The court cited examples of firms whose scrips were manipulated at the behest of Mr Parekh.

Parekh, his cousin Kartik Parekh, and others were found guilty for manipulating scrips of several companies. These include Saimangal Investrade, Chat Computers, Panther Fincap, Luminant Investment, Panther Investrade, Classic Credit, and Classic Infin.

Sebi on December 12, 2003, had passed an order debarring Parekh from dealing in the securities market. Against that, he moved the Securities Appellate Tribunal, which in 2006 had upheld the market regulator order. But the tribunal had exonerated him in the matter of alleged price manipulation in Lupin Laboratories scrip. Challenging the SAT order, Parekh and others had moved to the apex court.

Arguing that the SAT had exonerated other entities and also reduced the quantum of punishment, Ketan Parekh alleged that he was being treated unequally compared to other persons and entities such as Credit Suisse First Boston and Dresdner Kleinwort Benson, who were suspended for 2 years and 18 months, respectively.

While stating that the Sebi decision affected his business and livelihood, he stated that the tribunal's judgement, upholding the market regulator's decision, was 'grossly disproportionate, excessive and unreasonable."

Parekh had said that synchronisation or matching of trade was perfectly legal and permissible in the securities market and the tribunal had also observed that "a synchronised trade or trade that matches off market is per se not illegal."

"Every trade, whether executed on the platform of the stock exchange or off market, must be matched as to the quantity and the price before it gets executed. All trades executed in the manner result in beneficial transfer of ownership of shares from the seller to the buyer. Mere volumes or value of transactions do not make such transaction illegal...," Parekh had stated in his petition.

According to him, the price discovery mechanism of the stock exchanges was not distorted as the trades were executed at the prevailing market price and within the price barrier and price restriction imposed by Sebi to control fluctuations. However, Sebi had contended that the stock broker had aided and abetted entities associated with and controlled by him in violation of the provisions of the Sebi (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 1995.