Sebi finds Ketan Parekh trading thru front firms

Market regulator Sebi on Thursday said debarred stock broker Ketan Parekh appears to be trading in stocks through certain front entities, and referred the matter to the Enforcement Directorate for further investigation.
“...it appears that he (Ketan Parekh) has conveniently used the connected clients at will as its front entities for executing trades desired by him in the securities market,” Sebi said in a order barring 26 entities from the market.
Ketan Parekh and his companies were banned by market regulator Sebi from participating in securities market for masterminding the multi-crore stock scam during 1999-2001.
SebiI in its  order said these kinds of trades by Ketan Parekh are possible because the “connected clients” can trade without any restraint.

Origin of funds probed

The probe by Sebi found that the flow of funds originating from Parekh, when juxtaposed with securities market transactions of connected clients leads to the possibility that these trades were executed to confuse the funds trail and to integrate the money originating from the banned stock broker into the banking system.
“This needs to be examined by an appropriate agency and therefore Sebi is referring the matter to the Enforcement Directorate, market regulator said. Parekh’s possible involvement was found by Sebi during its investigation into alleged manipulative trading in the scrips of Cals Refineries Limited, Confidence Petroleum India Limited, Bang Overseas Limited, Shree Precoated Steels Limited (now known as Ajmera Realty & Infra India Limited) and Temptation Foods Limited.
Sebi said at least five of the connected clients appeared to be related to Shirish Maniar who was arrested by CBI along with Parekh in Madhavpura Merchantile Cooperative Bank case. Parekh had siphoned off over Rs 880 crore leading to its collapse.
Earlier, Sebi had Parekh and 17 other entities from participating in the market following a probe into purchase sale and dealing in the shares of companies like HFCL, Zee Telefilms, Adani Exports, Ranbaxy and Aftek Infosys between October 1999 and March 2001.
In its interim order, Sebi banned 26 entities and persons, including Maruti Securities Limited and asked them to reply in 15 day’s time. Sebi also said that connected clients made substantial losses on account of the dealings in the scrips of Cals Refineries, Shree Precoated Steels and Temptation Foods.
They continued to execute such uneconomic transactions indicate that they possibly had alternative pay-offs outside the securities market.
They also paid reduced income tax on account of the set off of losses due to their dealings in the scrips of these three companies.Sebi has referred this aspect of the matter to the Income Tax Department.
The regulator has also asked the BSE and the NSE to examine the dealings of Chimanlal Maneklal Securities, through which connected clients were selling the scrips of Cals Refineries.
Sebi also refers to income tax department investigations which revealed that many of the connected clients were acting as conduits for routing Ketan Parekh’s funds.