Sucheta Dalal :First Global Docked
Sucheta Dalal

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First Global Docked  

November 5, 2009


On 28th October, Shankar Sharma, vice chairman, First Global Stockbroking Pvt Ltd, lost an appeal before the Securities Appellate Tribunal (SAT) against an order that barred him from the capital market for a year. This pertains to a 2001 charge of synchronised and fictitious trading to create artificial volumes in certain scrips. At the time of going to print, Mr Sharma and his lawyer said they planned to appeal before the Supreme Court against the SEBI (Securities and Exchange Board of India) order; however, more twists and turns cannot be ruled out even earlier. For one, SAT has not vacated the stay on SEBI’s 2008 order. That will be decided on 3rd November and he will undoubtedly plead for time to appeal to the apex court. The SAT order, however, is extremely well-documented and meticulously nails every issue, charge and contention by Mr Sharma. Primarily, it confirms that First Global Stockbroking and its sub-broker Vruddhi Confinvest India (fully owned by Mr Sharma and his wife) had, indeed, indulged in fictitious trades among themselves to create artificial volumes.
It also busts several of Mr Sharma’s distortions that have been faithfully relayed and repeated by large sections of the media. Firstly, SAT categorically upheld SEBI’s February 2009 order barring Mr Sharma and his sub-broking firm from the market for a year. It confirmed that he had executed fictitious trades and taken opposite positions, which is manipulative and not permissible “in as much as the buy/sell orders were placed at almost the same time.” Secondly, it shot down the claim that
Mr Sharma was the victim of a ‘witch-hunt’ because he had funded Tehelka which exposed a defence scandal during the BJP regime in 2000-01. Third, it re-confirmed that the SEBI investigation against First Global began on 2 March 2001, before the Tehelka exposé—a fact that the media routinely ignores while peddling the ‘witch-hunt’ theory, even though the February 2009 order has been issued under a Congress government that has been exceptionally and officially supportive of the broker. Fourth, SAT confirms that the SEBI order, set aside in 2004, was “only on the ground” that the regulator failed to send him a reply in 30 days under the rules prevalent then; the case was never decided on merits. SAT also points out that Mr Sharma and his firm have repeatedly raised technical objections to SEBI’s notices or moved the Bombay High Court against its orders rather than respond to the show-cause notice to “avoid a decision on merits.”
Mr Sharma moved court even in March 2008 when a supplementary show-cause notice was issued to him; the writ was withdrawn in October 2008. SAT also refused to accept Mr Sharma’s contention of the double jeopardy involved, saying that the supplementary notice pertained to a separate matter and involved his proprietary trades with his own sub-broking firm. As SAT says, “It is true that the broker and sub-broker are companies, but when we lift the veil, it is the appellant and his wife lurking behind the curtain.” Mr Sharma’s next move will be interesting to watch.

-- Sucheta Dalal