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Sebi order absurd: Shankar Sharma

February 16, 2009 10:55 IST
First Global's Vice-chairman Shankar Sharma said he had nothing to do with the market crash in early 2001 as alleged by the market regulator.

Responding to Sebi's order banning him from trading in shares for one year, Sharma said "the data that we have managed to get from Sebi (Securities and Exchange Board of India) under the Right to Information Act itself shows that we were not even among the top 50 sellers in the market during the impugned period."

Sebi, in an order released on Friday, charged Sharma as having indulged in fictitious trading by taking opposite positions at First Global Stock Broking and Bang Equity, another broking firm owned by the late Nirmal Bang and by giving false orders for purchase and sale of shares.

Sharma was originally issued a showcause notice in July 2001, then in March 2004 and one more in March 2008 which contained new data before the order was passed on Friday.

Sharma had already approached the Bombay High Court and the Sebi order has been stayed in advance by the court for four weeks. "We'll approach an appropriate forum for appeal (like SAT)," Sharma said.

In a press note issued today, Sharma said "the Sebi order is the latest instalment of a witchhunt against First Global and its directors that the regulator has been pursuing since 2001, in the face of all data that exonerates them.

"We were buyers, in fact, and could not have had anything to do with the market fall. The hard data fully exonerated us from having anything to do with the fall, as did the Joint Parliamentary Committee. There was no reason (except a political one) for even investigating us — a fact Sebi has not admitted even till date," Sharma said.

Sharma alongwith his wife Devina Mehra and two companies — First Global Stockbroking Pvt Ltd and Vruddhi Confinvest —  were show caused on July 17, 2001 on the very same charges that were contained in the impugned show cause notice dated March 2004 and March 2008.

In September 2002, a final order on the show-cause notice was passed by Sebi against the two companies. However, no action was proposed or taken against the directors either by the enquiry officer or by the Sebi board and consequently they were exonerated. "Another show-cause on the same matter is an absurdity and completely illegal," the press note said.

Sharma said the data introduced in the March 2008 notice was a totally a new set of data not considered by either the enquiry officer or by the board while passing the original order dated September 12, 2002 against his companies.

In the present case, the order against the companies was already set aside by SAT in December 2004 and there can be no question of vicarious liability, he said.

Sharma said in any event, the charges of 'fictitious trades' to impact market price are absurd on the face of it, given that the trades are in large, liquid stocks like Reliance Industries, Infosys, HLL, Zee etc. where a few isolated transactions in volumes that are a minuscule portion of daily volumes can have no impact on price. All these trades were fully disclosed to the exchanges and the regulator.

The stock exchange data proved incontrovertibly, First Global was, in fact, a net buyer in the impugned period, and to accuse a buyer of perpetrating a fall is an absurdity

BS Reporter in Mumbai