Press Release

In the wake of sudden payment crisis in the month of June 1998, on BSE and NSE and allegations of manipulation in the scrips of BPL, Videocon and Sterlite, investigations were conducted by SEBI. Investigations prima facie revealed that some brokers acting in a concerted manner for common set of clients built up unusually large positions in these scrips resulting in distortion of the market equilibrium and creation of artificial market. The investigations also brought out that these common set of clients were acting as a front for Shri Harshad S. Mehta, a suspended broker of BSE and an accused in the securities scam of 1992. 
Based on these investigations, enquiry proceedings were initiated against the brokers involved and actions were taken including issuing directions to some of the brokers under Section 11B of the SEBI Act directing them not to undertake any fresh broking activity till the enquiry proceedings were completed. Out of those brokers against whom enquiry proceedings were initiated, enquiry proceedings have got completed in respect of the following:

1. Satyanarayan Nangalia, member BSE

2. Valfin Financial Services Pvt. Ltd., member NSE and;

3. Asian Securities and Stocks Ltd., member NSE

It may be mentioned that the trading terminals of these brokers were switched off by the Stock Exchange, Mumbai and National Stock Exchange respectively earlier. The trading terminal of Satyanarayan Nangalia was switched off from June 15, 1998 and Valfin Financial Services Pvt. Ltd. from June 17, 1998 and in the case of Asian Securities and Stocks Ltd. from August 17, 1998.
 
After considering the recommendations of the enquiry officer, submissions made by these brokers, i.e. Satyanarayan Nangalia, Valfin Financial and Asian Securities and the materials and evidences available on record, it was found that these brokers were involved in the manipulations in the scrips of BPL, Videocon and Sterlite. These brokers dealt for common set of clients i.e. Damayanti Group for the first time who did not have any professional expertise in the securities market and financial soundness to deal at such large scale. They did not charge any upfront margins also from these clients. These brokers acting in concert with other brokers cornered a very large quantity of shares of BPL, Videocon and Sterlite (70% of deliverable shares of BPL, 40%/50% of Videocon and Sterlite) and created artificial market & manipulated the prices of these scrips and upset the equilibrium of the market. It was also found that the above 3 members made purchases, which were excessive and beyond their or their client’s means & financial resources and failed to honour their pay-in liability in time during the month of June 1998. Further, in the case of Satyanarayan Nangalia, it was found that it furnished false certificates to the exchange to the effect that no transaction was carried forward for more than 75 days knowing fully well that it was not true and the transactions were being carried forward beyond 75 days. It was also found that these 3 brokers did not report the spot transactions entered by them to the respective stock exchange. Investigations brought out that these brokers also allowed financial transactions in its books on behalf of its clients in the guise of trading in the scrips of BPL, Videocon and Sterlite. 
 
These brokers were thus, guilty of violating the provisions of SEBI Act, 1992 read with SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations 1995, SEBI (Stock brokers and sub-brokers) Regulations, 1992 and its Code of Conduct and Bye-laws of the Exchange where they are members. 
 
In view of the above, SEBI has ordered the suspension of the registration of these brokers. Suspension has been ordered for a period of 3 years for Satyanarayan Nangalia i.e. till June 14, 2001. In the case of Valfin Financial Services P. Ltd. and Asian Securities & Stocks Ltd., the members are suspended for a period of 18 months i.e. till December 16, 1999 and February 16, 2000 respectively. This period of suspension has been reckoned after taking into account the period of suspension of the trading terminals of the members by the respective exchanges.