Mumbai: India’s capital markets regulator, Securities and Exchange Board of India (Sebi), on Monday disposed of a case against Himachal Futuristic Communications Ltd (HFCL) for suspected involvement in rigging share prices in a case dating back to 1999-2001.
HFCL paid Rs10 crore to settle the case through a consent order, Sebi said in a statement posted on its website.
These out-of-court settlements, reached with the consent of the involved parties and the regulator, resolve administrative, civil and criminal disputes.
Stockbroker Ketan Parekh, the main accused in a stock market fraud dating back to 1999-2001, allegedly rigged share prices of 10 firms, including HFCL, in collusion with promoters through so-called circular trading.
Following a series of investigations by Sebi, Parekh and his front entities were found guilty of rigging prices of HFCL shares.
Officials of HFCL too were found guilty of violating norms governing prohibition of unfair trade practices.
In 2004, Sebi had sent two show-cause notices to the company, followed by several hearings. The regulator has now closed the case with the consent order.
Sebi has been resolving long-pending disputes through a series of consent orders in an attempt to reduce the backlog of cases.
According to Sebi’s annual report for fiscal 2009, the regulator had received 666 consent applications in 2008-09. It has disposed of 428 such applications, earning Rs47 crore, while 236 applications were rejected.
Parekh and his associates allegedly borrowed from the erstwhile Global Trust Bank Ltd (GTB) and Madhavpura Mercantile Co-operative Bank to illegally finance circular trading, in which sell orders are entered by a broker who knows that they will be offset through buy orders for the same number of shares at the same time and at the same price.
As a result, these trades don’t represent any change in the beneficial ownership of the security.
Parekh allegedly siphoned about Rs900 crore from Madhavpura Mercantile Bank for trading in shares and was unable to return the money, which led to the bank’s collapse. GTB was later merged with Oriental Bank of Commerce.
In December 2003, Sebi had banned Parekh and associated firms from trading in the market for 14 years.