The Securities and Exchange Board of India has barred Shankar Sharma from dealing in securities for one-year. The order pertains to a 2001 investigation and comes into force immediately after four weeks. Sharma indulged in fictitious trading, did not cooperate with Sebi, and indulged in concerted attempt to intefere with markets, it said.

Meanwhile, the market regulator has disposed off the showcause notice against Devina Mehra of First Global. CNBC-TV18’s Vivek Law delves deeper.

Here is a verbatim transcript of Vivek Law’s comments on CNBC-TV18:
All Sebi orders that were passed against various entities in the 2001 Ketan Parekh scam had relied on the fact that transactions were carried out knowing fully well who the other person on the other side was. That really seems to be the basis for Sebi’s order.

One of the reasons why this has come up now is that a lot of these orders from 2001 have been pending for a very long time. It has been eight years now.

Shankar Sharma’s case is slightly different. In 2004, he had approached the Bombay High Court saying that he had got a favourable order from Securities Appellate Tribunal. However, that was on technical grounds that Sebi had not filed its investigation process within 30 days. He had gone to the Bombay High Court after that. The Bombay High Court had at that point said that it does not see any reason why Sebi cannot issue a showcause notice and why he must not reply. Of course it had put a pre-condition that if the order finally against him is adverse, it will be stayed for four weeks to give him a chance to come back to the court.

The point that Sebi makes in its order, which is where the significance lies, is that it says from 2004 onwards Sharma has failed to reply to any of its showcause notices. It gives a list of dates; it gives a list of dates of hearings that were asked of him, a list of various letters sent to him. The regulator says that he was not cooperating, he was raising technicalities. That is what the regulator’s order says.

Now the last hearing that he was asked to come to was on September 1, 2008, which the regulator says he did not come. He did subsequently go back to the Bombay High Court and asked for a quashing of this entire showcause notice procedure. Devina Mehra of First Global also said earlier that they did not really believe in the very basis on which Sebi was proceeding.

Now as per Sebi’s order, it says that in October 2008 the Bombay High Court dismissed that writ petition that Sharma had filed, which had asked for a quashing of the entire show cause procedure.

The basic point really is that for four years after a Bombay High Court order of a showcause to be issued and adjudicated and finalised, we finally have an order in place where the regulator has held him guilty of fictitious transactions as well as made certain scathing remarks on the fact that he did not cooperate with the regulator in the whole process.

What is going to happen next? Mehra said Sharma will utilise this four-week period to go back to the Bombay High Court because he feels that the entire process of Sebi under law was faulty in the first place, and it had no powers to proceed against him. Also, the whole fictitious or synchronised trading, as it is called, was something that was a practice that was adopted by everybody at that point because there were limits to which you could transact on a stock exchange at that point. So, this made it mandatory to go through multiple brokers. Of course, he has denied all charges of price rigging or manipulation

source: moneycontrol

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