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COVER STORY: THE STOCK SCAM; MODUS OPERANDI
D.R. MEHTA,
SEBI Chairman
 CHARGES:
Allowed cabals of bulls and bears to use insider
information and run amok in the market. Lax regulation and delayed action
led to investors losing crores of rupees in a series of scams over the past
six years. Specifically, allowed Ketan Parekh and his group to rig share
prices with impunity for over 18 months and later let the bear cartel trash
the market despite a good budget.
DEFENCE: Called for broker-exposure levels
through bull run, imposed more margins, punished riggers and warned investors
against exuberance in February 2000. "We took necessary steps but
we can't regulate greed," says Mehta.
VERDICT: SEBI has to be seen in control,
not in collusion with brokers. Investors have lost confidence in the market.
To restore it, a clean-up must begin from top.
P.S. SUBRAMANIAM, UTI Chief
 CHARGES:
UTI's investments in the stock market mirror those of Ketan Parekh. Market
believes that many stocks KP ramped are on the UTI portfolio. And that
KP may have successfully placed them in UTI. UTI is also suspected to
have had a hand in KP's bailout. As a result, a number of its funds, including
US 64, have been hit and investors have lost money.
DEFENCE: KP is not even a registered
broker with UTI. Subramaniam says nearly 30 other MFs have a similar tech
portfolio. "Does this mean they are all bailing out KP?
VERDICT: Unconvinced, market believes
UTI is in league with KP. Why else would it hold 216 lakh shares of Satyam
Computers and 84 lakh shares of HFCL?
S.P. TALWAR, Dy Governor, RBI
 CHARGES:
RBI let banks, particularly new private banks, to use connections and
risky instruments to fund brokers, leading to the crisis of confidence.
Merger ratios are rigged by brokers and in cases SEBI is probing insider
trading.
DEFENCE: Broker funding by banks were
within established norms. The issue is exaggerated. When market was down,
they wanted banks to invest or fund stock market operations. Now they
are blaming banks.
VERDICT: Partial autonomy and multiplicity
of roles played by RBI is the bane of the banking system. The fact that
many private banks have been forced to fork out money against guarantees
not backed by adequate security, proves that the broker-banker nexus,
first unearthed in 1992, is still operational.
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