August 26, 1999
PR No. 194/1999


Investigations were conducted by SEBI into the alleged price manipulations in the scrips of BPL, Videocon and Sterlite, in the wake of sudden payment crisis in the month of June 1998, on BSE and NSE. 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 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 following:

i) GNH Global Securities Ltd., member BSE
ii) Mahico Pvt. Ltd., member BSE 
iii) Star Share & Stock Brokers 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 earlier. The trading terminal of GNH Global Securities Ltd. was switched off from June 15, 1998 and Mahico Pvt. Ltd. from June 22 to August 3, 1998 and again from January 4, 1999 onwards and in the case of Star Share & Stock Brokers Ltd. from December 5, 1998. 
After considering the recommendations of the enquiry officer, submissions made by these brokers, i.e. GNH Global, Mahico and Star Share, 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 clients means & financial resources and failed to honour their pay-in liability in time during the month of June 1998. Further, in the case of GNH Global Securities Ltd., it was found that it exceeded the carry forward limit set by SEBI/BSE in many settlements and it did not report the spot transactions entered by it to the stock exchange. It was also found that it allowed financial transactions in its books on behalf of its clients in the guise of trading in the scrips of BPL, Videocon and Sterlite, besides furnishing a false certificate regarding carry forward of trades for its client beyond the prescribed period. 
These three brokers were found to be involved in price manipulations, and are 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 36 months for GNH Global Securities Ltd. for a period of around 13 months for Mahico Pvt. Ltd. and for a period of 12 months for Star Share & Stock Brokers Ltd. This period of suspension will be reckoned from the date when the trading terminals were switched off by the exchanges and thus, the suspension in respect of GNH Global Securities, Mahico Pvt. Ltd. and Star Share & Stock Brokers Ltd will be effective till June 14, 2001, December 31,1999 and September 16,1999 respectively.