You are on page 1of 13

{

KETAN PAREKH
SCAM
PRESENTED BY:
Siddhesh Kesarkar
Sagar Bora
Dipti
Aarti
Sonali

Ketan Parekh is a former stock broker from Mumbai.
He was convicted in 2008, for involvement in the
Indian stock market manipulation scam in late 1999-
2001.
Currently he has been debarred from trading in the
Indian stock exchanges till 2017
He was trainee of Harshad Mehta.
Ketan parekh had trading relations with companies
like GLOBAL TRUST BANK & MADHAVPURA
cooperative bank.
Introduction 21

Ketan Parekh [KP] is a soft spoken,
thin, tall & Chartered Accountant
By qualification.
KP came from a family of brokers
& was known to maintain a very
low profile.
He was mainly known for his
luxurious fleet of imported cars.

21
KPs business practices were unconventional.
He was not an ordinary broker, who just lived on the brokerage
commission.
Like Harshad Mehta KP turned into an operator to drive share
prices with a strong motive, as he thought it would procure
advantage for him.
Promoters through their investment companies provided him
with capital to hold on the share prices..
He made use of his contacts at Global trust bank to access
funds for market manipulation.
Business dealings 22
KP was well known for his
ability to instantly take
SENSEX either way.
KPs stocks used to go up
like a rocket, if he decides
to bring a stock down, he
would do it instantly.
According to an
investigation by SEBI. KP
used to make use of banks
& promoter funds to rig the
markets.
22
K- 10 stocks 22
Indigenous carry-forward system invented on the Bombay
Stock Exchange
Badla trading involved buying stocks with borrowed money.
The stock exchange acts as an intermediary.
Interest rate determined by the demand for the underlying
stock
Maturity not greater than 70 days

Badla System 23
When stock prices were high, they were pledged [girvi
rakhna] with banks.
No problems as long as prices were rising.
It could not have been possible without the involvement of
banks
A small Ahmadabad-based bank, Madhavapura Mercantile
Cooperative Bank (MMCB) was KPs main ally in the scam.
KP and his associate started tapping the MMCB for funds in
early 2000.
Stock market crash of 2000
KP started borrowing heavily
Attempted to rig the price upwards and later sell.
But failed to do so.



How it happened? 23
Though KP was a successful broker, he did not have money
to buy large stakes as he held the stakes of more than Rs 750
million in July 1999, according to a report.

Analyst claimed that he had borrowed from various
companies and banks for this purpose.

His financing method was fairly simple.

He bought shares when they were trading at low price and
saw the prices go up in the bull market while continuously
trading.

When the prices was high enough, he pledged the shares
with banks as collateral for funds, and also borrowed from
the companies like HFCL.


FACTORS THAT HELPED
KETAN PAREKH 24
Ketan Parekh was arrested by CBI on 30
th
March 2001.
He was charged defrauding Bank of India by almost $20
Million
Global Trust Bank and Bank of India 's merger failure
RBI ordered some banks to furnish data of Capital
market exposure
SEBI inspected the books of several brokers suspected
of triggering the crash

Implications 24
One of the biggest Fall in BSE -700 points
KP and other traders were banned from trading for 17 years
Short selling was banned for 6 months.
Badla system was banned
All shares that were put as collaterals should be done so
through NSE and BSE.
10% additional deposit Margins.


24
SEBI launched immediate investigation on the scam.
It suspended all the broker member directors of BSES
governing board
SEBI also banned trading by all stock exchange presidents,
vice presidents and treasurers
SEBI banned naked short sales.
RBI started inspecting accounts and sub-accounts twice a year
in spite of once in two year.
SEBI allowed banks for collateralised lending only through
BSE and NSE

Steps taken by SEBI after
scam 25

THANK YOU . . . .
. .

You might also like