September 02, 1997
PR No. 86/1997

SHOW CAUSE NOTICES ISSUED 
IEMI DEPARTMENT

Based on market information and media reports, SEBI had conducted enquiries into the allegation of unauthorised transactions on Stock Exchanges and also alleged depression of market prices. As a result of these enquiries the first investigation report has been submitted to Chairman, SEBI. 
 
This report prima-facie establishes the violations such as carry forward transactions, evasion of margins, non reporting of transactions, violations under the Fraudulent and Unfair Trade Practices Regulations as well as the SEBI (Stock Brokers and Sub-brokers) Regulations etc. Some elements of short selling and bear hammering also were noticed. 
 
Based on this report SEBI is satisfied that there appears to be gross negligence and participation of elected directors including the President and Vice-President of Pune Stock Exchange in all these unauthorised transactions. Thus the Governing Board of the Pune Stock Exchange appears to have failed in its duty of protecting the interest of investors in the securities market and ensuring proper and legal conduct on the part of the member brokers of the Exchange. Hence, Show Cause Notice has been issued to the Governing Board of The Pune Stock Exchange for supersession. Besides, several members of the Pune Stock Exchange, The Stock Exchange, Mumbai and the Calcutta Stock Exchange have also indulged in unauthorised activities and market manipulation. One Mumbai based company and one Pune based company have also indulged in carry forward transactions and have committed prima facie violations under the Fraudulent and Unfair Trade Practices Regulations by prima facie indulging in unauthorised transactions intended to depress the market. 
 
Accordingly, show cause notices have been issued. These would affect 33 brokers (25 in Pune, 6 in Calcutta and 2 in Mumbai). Of these, six brokers, five in Pune and one in Calcutta, are either office bearers or members of the Governing Board of the Stock Exchanges. Additional action u/s 11B of the SEBI Act have been taken against these brokers. The Governing Board of the Pune Stock Exchange has been issued a show cause notice as to why it should not be superseded. Two investment companies have been issued show cause notices as to why they should not be debarred from operating in the securities market.