The Hindu Business Line : SEBI bars 14 entities, directors for abnormal dealings in GHCL

Kolkata April 26 The Securities and Exchange Board of India has barred 14 entities of a New Delhi-based business house called Jalco Group and its associates as also 9 directors of the group from dealing in shares of GHCL. Mr G. Anantharaman, whole-time member of SEBI, also ordered depositories not to give effect to any transfer of shares of GHCL lying in the beneficial owner accounts of the entities and their directors.

The regulator's directions became operational today. The entities and individuals are, however, free to file written objection within15 days.

Meanwhile, the GHCL stock crashed 10 per cent to Rs 165.15 from Rs 183.45 while volumes also dwindled to about 31,000 shares against its two-week average of 1.91 lakh shares.

SEBI said it took these steps as "emergency measures to protect the interest of the investors". Prompted by surveillance alerts, SEBI undertook a preliminary examination and discovered "certain abnormal dealings" in the GHCL stock in the period between November 1, 2006, and March 31, 2007. The transactions, the regulator summed up, raised questions about the "ulterior motive" of the Jalco entities.

The regulator has initiated a full-scale inquiry into the suspected manipulation in the stock through synchronised trades. The combined trades of Jalco Group entities in GHCL counter on the BSE and NSE platforms in the relevant five months represented more than 40 per cent of the total transactions in the counter.

Artificial volumes

The large-size transactions in GHCL stock by Jalco Group entities through various client accounts and brokers, including synchronised trades, led the regulator to smell "artificial volumes", which according to SEBI, might have facilitated inclusion of the stock in the derivative segment.

Mr Anantharaman said "the Jalco Group undoubtedly created an artificial market to mislead the genuine investors." He observed: "It is too much of a coincidence over too long a period in too many transactions".

SEBI found that same set of entities had entered into synchronised trades amongst themselves for the same quantity of shares almost simultaneously.

The initial probe further revealed that the seven Jalco Group entities executed several off-market demat transactions among themselves. These entities had also traded GHCL shares through 70 accounts (35 each on the BSE and NSE) and 38 brokers (BSE - 18 and NSE - 20).

The SEBI probe also discovered that three of seven other entities sharing the same New Delhi address as Jalco group and with 70 client accounts with 17 brokers of BSE and NSE, were mentioned as part of the promoter group of GHCL as on September 30, 2006.

SEBI observed that they had not dealt in the GHCL stock during the relevant period. "However, it is possible that they are apparently related to the Jalco Group and that they may have their own plans to trade the GHCL scrip adopting the same modus operandi as Jalco Group at an appropriate time to sustain the volume," SEBI whole-time member felt.

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