CAPITAL MARKET SCAMS

OVERVIEW

• CAPITAL MARKET• CAPITAL MARKET SCAMS• HARSHAD METHA• KETAN PAREKH

CAPITAL MARKET

• THE CAPITAL MARKET IS THE MARKET FOR SECURITIES

• IN THIS COMPANY AND GOVERNMENT CAN RAISE LONG TERM FUNDS

• IT’S A MARKET IN WHICH MONEY IS LENT FOR PERIODS LONGER TAH A YEAR

• THE CAPITAL MARKET INCLUDES THE STOCK MARKET AND BOND MARKET

WHAT IS CAPITAL MARKET SCAM?

• IT IS BASICALLY THE FRAUD DONE IN THE CAPITAL MARKET WITH THE INVESTORS BY MANUPULATING THE FACTS IN ORDER TO ATTAIN ENORMOUS PROFITS

INTRODUCTION TO “BIG BULL OF THE TRADING FLOOR”

• HARSHAD MEHTA• THE GREAT INDIAN SCAM -1992

WHO WAS HE?

• HARSHAD MEHTA• STARTED HIS CAREER WITH NEW INDIA

ASSURANCE COMPANY• QUIT HIS JOB IN 1981 TO BECOME A SUB-BROKER• WENT BANKRUPT IN 1982 AND RECOVERED

SOON TO BECOME MORE STRONGER• HE WANTED TO BECOME THE MOST SUCCESSFUL

BROKER- THERE BY HE EARNED THE NAME OF “THE BIG BULL”

WHAT WAS THE SCAM ABOUT?

• DIVERSION OF FUNDS• USE OF READY FORWORD (RF) TO MAINTAIN

SLR (STATUTORY LIQUIDITY RATIO)• CREATIVE ACCOUNTING• INTRA-DAY TRADING

HOW IT WAS DONE AND THE ROLE OF BROKER ?

• MEHTA SOON MASTERD THE TRICKS OF TRADE BY MANAGERING SEVERAL BROKERS AND SET OUT ON DANGEROUS GAME PLAN

• MEHTA HAI SIPHONES OFFTHE HUGE MONEY FROM SEVERAL BANKS AND MILLION OF INVESTORS WERE CONEDIN THE PROCESS.

• HIS SCAM WAS EXPPOSED AND THE MARKET CRASHED.

EXPLOITING THE LOOP HOLE IN THE BANKING SYSTEM

• HE TRIGGERED THE RISE IN BOMBAY STOCK EXCHANGE IN THE YEAR 1992 BY TRADING IN SHARES AT PREMIUM ACROSS MANY SEGMENTS

• TAKING ADVANTAGES OF LOOPHOLES IN THE BANKING SYSTEM, HARSHAD AND HIS ASSOCIATES TRIGGERED A SECURITIES SCAM DIVERTING FUNDS TO THE TUNE OF RS 4000 CRORES FROM THE BANKS TO STOCK HOLDERS BETWEEN APRIL 1991 TO MAY 1992

• HE WAS ARRESTED AND BANED FOR LIFE FROM TRADING IN THE STOCK MARKETS

• MAJOR CULPRITS WERE BROKERS, BANKERS AND FINANCIAL INSTUTIONS.

• HE WAS CHARGED WITH 72 CRIMINAL OFFENCES. A SPECIAL COURT ALSO SENTENCED SUDHIR MEHTA, HARSHAD’S BROTHER, 6 OTHERS, INCLUDING FOUR BANK OFFICIALS.

• THEY GOT RIGROUS INPRISONMENT FROM 1 YEAR TO 10 YEARS ON A CHARGE OF DUPING STATE BNK OF INDIA TO THE TUNE OF RS 600 CRORES IN CONNECTION WITH THE SECURITES SCAM THAN ROCKED THE FINANCIAL MARKETS IN 1992.

HIS FAVORITE STOCKS INCLUDED

• ACC• APOLLO TYRES• RELIANCE• TATA IRON AND STEEL CO. (TISCO)• BPL• STERILITE• VIDEOCON

MARKET AT THE TIME OF HARSHAD MEHTA SCAM

THE END OF BULL STORY…

• LIFESTYLE (FLASHY CARS AND LIFE LIKE A CELEBRITY)

• 31ST DECEMBER 2001- THE DEATH OF THE BULL

• FOREVER REMEMBERED AS THE ARCHITECT RS. 50 BILLION SCAM