Although the Government is armed with a detailed report from the Securities and Exchange Board of India (Sebi), there is a lull in the investigation and it is almost as though all the investigative agencies are waiting for a signal from the Joint Parliamentary Committee about the seriousness of their probe. If it is indeed restricted to post March 3, 2001, then it’s celebration time, because everybody goes Scot-free and can begin to plan their next ‘operation’. In fact there are reports that Kolkata brokers who have lost a couple of thousand crores during the payment crisis are even willing to square off their dues for a payment of a couple of hundred crores of rupees. With that capital, they hope to ‘play’ the market again and recover their losses.
In Mumbai, some of the entities linked to the leading bull operator are on a damage control spree, which is in the form of a poison pill. Two of their brokerage firms have allegedly juggled their books to show huge losses, almost closed down their operations and virtually turned the companies into shells. Anticipating regulatory action, they have simply withdrawn their funds and transferred all valuable assets out of the companies. If that were not all, one of them is preparing for future business — it is all set to buy a brokerage membership through a new corporate entity.
Short staffed or selective?
SEBI officers refuse to buy the official claim to the Joint Parliamentary Committee that it was handicapped by a staff shortage in key areas such as supervision. Confidential sources point out that two division chiefs in the investigation department —Usha Narayanan and Suresh Menon —have not yet been given charge of any of the scam cases. Ironically, after all the song and dance by the finance ministry about not granting extensions to deputationists into Sebi, it has allowed the regulator to bring in three more deputationists each with terms of six months, one year and a little longer respectively.
The policy issue
The Comptroller and Auditor General (CAG) has already passed strictures against Sebi’s lack of HRD policies, but even the CAG has probably ignored the history of Sebi’s organisational discontent. Sebi employees first protested against recruitment and promotional policies in 1995. At that time, two executives — PC Singh and JN Gupta — had led an open protest following which the chairman, says staffers, had ‘promised in writing’ that no more persons would be brought on deputation. But Gupta and Singh left Sebi and the commitment was forgotten. In 1997 there was a black band protest against the plan to induct a powerfully connected IRS employee. The appointment was dropped and there were fresh assurances that there would be no new deputationists. Later the finance ministry got into the act, and some strong letters were apparently exchanged between Shankar Acharya, the ministry nominee on the Sebi board and the regulatory. Again, nothing happened. But resentment is simmering hot again and if angry murmurs are to be believed, there may be some public embarrassment in the offing.
Credit Suisse First Boston (CSFB) which has been banned from stock broking and is being investigated for its close links to Ketan Parekh got a slight reprieve from the Sebi on one count of illegal stock lending, last week. But its global woes are mounting. The latest Economist reports that CSFB was deemed to have broken New Zealand stock exchange rules in a takeover scrap for Montana, a big wine maker and its now defunct Japanese derivatives business broke securities laws and, in America, it is undergoing investigations linked to rigged initial public offerings.
Seminars on options and futures trading are all the rage today. Brokers and investors are flocking to learn the new game and the BSE is even conducting a seminar to educate the media on derivatives trading. But as far as market share goes, there is absolutely no competition between the NSE and the BSE anymore. The NSE has cornered a 90 per cent share of the market while a rudderless BSE is probably far too busy protecting the bourse journalists and filing police complaints against them.
Waking up to futures
Online derivatives.com has good reason to sneer at the media. After ignoring the market for almost a year and carrying error-ridden data, the leading newspaper is waking up to Futures forecasting on the eve of a full year of their existence, it says. Futures trading began on June 9 last year. But the site is magnanimous too. That the media has finally woken up is good news, it says, because this will only lead to more discussion, awareness and streamlining of products, quotes and data.