INVESTIGATION ENFORCEMENT AND SURVEILLANCE DEPARTMENT

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, which were acting as front for Shri Harshad Mehta, built up unusually large positions in these scrips resulting in distortion of the market equilibrium and creation of artificial market. Mefcom Securities Ltd. was found to be one of the brokers involved in market manipulations. 
 
Pursuant to the investigations and after taking into consideration, the material and evidence on record, the calculated manner in which the manipulation has been caused, the gravity and seriousness of the offences, SEBI directed some of the brokers including Mefcom Securities Ltd. vide Order dated October 30, 1998 under Section 11B of Securities and Exchange Board of India Act, 1992 not to undertake any fresh business as a broker till the enquiry proceedings are completed. This order was to come into effect from November 2, 1998 onwards in respect to membership of Mefcom Securities Ltd. of BSE and from November 4, 1998 onwards in respect to its membership of NSE. 
 
Simultaneously, enquiry proceedings were initiated against these brokers including Mefcom Securities Ltd. under the SEBI Regulations. On completion of the enquiry proceedings, SEBI found Mefcom Securities Ltd. guilty of indulging in price manipulations and ordered suspension of its membership at BSE and NSE for a period of 18 months on July 29, 1999. This suspension was to come into effect from the date when the terminal of the broker was switched off by the Exchange and was in force till December 9, 1999. 
 
In the meanwhile, it was noticed that M/s Mefcom Securities Ltd. continued to trade at NSE till July 30, 1999 despite order of SEBI u/s 11 B of the SEBI Act, 1992 directing Mefcom not to undertake fresh business as a broker till the enquiry proceedings were completed. The broker was asked to explain why the order of SEBI dated 30.10.98 was not obeyed. The broker was also given an opportunity of personal hearing. On considering the submissions made and material available on record, it was observed that explanation of the broker was not satisfactory and was factually incorrect . In view of this non-compliance of the SEBI order by the broker, directing it not to undertake any fresh business till completion of enquiry proceedings, SEBI has ordered suspension of registration of Mefcom Securities Ltd. as member of BSE and NSE, for a further period of nine months. This suspension came into force with effect from December 9, 1999 and will be in force till September 8, 2000.