Investigation, Enforcement and Surveillance Dept.

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. Investigations also brought out that this common set of clients were acting as a front for Shri Harshad S. Mehta, a suspended broker of the 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 broking activity till the enquiry proceedings are completed and appropriate orders passed thereon. Out of those brokers against whom enquiry proceedings were initiated, enquiry proceedings have got completed in respect of Sony Securities Ltd. 
 
It may be mentioned that the trading terminal of the broker was deactivated by the NSE on 11th June 1998. 
 
After considering the recommendations of the enquiry officer, submissions made by the broker, materials and evidences available on record, it was found that the broker was involved in the manipulations in the scrips of BPL, Videocon and Sterlite. The broker mainly dealt for Damayanti Group and though was dealing for these clients for the first time who neither had any professional expertise in the securities market nor financial soundness to deal at such large scale, did not charge any upfront margins. The broker 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 broker made purchases in these scrips , which were excessive and beyond its or its clients means & financial resources. The broker did not report the spot transactions entered by it to the stock exchange. Sony Securities also failed to discharge its pay-in liability in time during the month of June 1998 and it is yet to clear all the pending dues to the exchange . 
 
The broker was 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 NSE . 
 
In view of the above, SEBI has ordered the suspension of the registration of Sony Securities Ltd. for a period of two years (24 months).The period of suspension will be reckoned from the date when the trading terminal was switched off by the NSE and the suspension will be effective till June 10, 2000 .