Kolkata, Sept. 30
THE Calcutta Stock Exchange on Friday directed its members not to trade in six companies identified in SEBI's recent order that banned a number of CSE brokers. Trading in the stocks will remain suspended till further directions.
The companies are Prime Capital Markets, Subh Laxmi Projects, Global Capital Market, Bankam Investments, ST Services and Amluckie Investment Co. These are all small-cap stocks that saw sharp price variations in the March-September period on Lyons Range. The variations ranged from 200 per cent to 1,900 per cent.
Eleven CSE members were yesterday directed by SEBI, not to deal in securities in any manner, directly or indirectly. The ban has already come into effect.
The regulator has cited examples such as Global Capital Market, which, in a period of three months, moved from Rs 1.25 to Rs 13.50, a 980 per cent gain. Similarly, Bankam Investments moved from Rs 2.10 to Rs 16.85, a 702 per cent increase.
The banned members are: Shivam Stock Broking, Sanju Kabra, DB & Co, Rajendra Prasad Shah, Badri Prasad & Sons, M Bhiwaniwala & Co, Ram Mohan Sarda, AV Shares & Stock Brokers, S L Sultania, Ahilya Commercial and S Jhunjhunwala & Co.
The brokers, the regulator said, followed a common modus operandi of artificially jacking up the price and creating false volumes through "continuous self deals executed on the same terminal and cross deals amongst themselves". As a result, they enriched themselves and also aided the process of legitimising their gains.
The companies, known to have recorded poor or negative financial performance, have not filed the latest financial statements with CSE. "Such acts by the brokers pose a serious risk to the stability and settlement system of the stock exchange, besides raising the spectre that innocent investors may get drawn by the artificial trading volumes generated by these brokers and may in the process be beguiled into investing in the shares of these fundamentally weak companies at unjustifiable market prices, only to be left adrift," the order said.
One of the companies, Prime Capital Market, recorded a sharp rise on Lyons Range, from Rs 14 to Rs 280, between March 17 and September 15. This translated into an increase of 1,903 per cent in a span of about 6 months. Incidentally, its latest financial results only pertain to the year ended March 2003. It was observed (based on statements filed with CSE for 2002 and 2003) that it had no sales and had incurred net losses of Rs 4 lakh and Rs 6 lakh respectively.
In the absence of any details about its financial performance in the past two years, "the astronomical rise" in the price can only be artificial, SEBI has said. An analysis of CSE's trading data revealed that only three brokers DB & Co, Sanju Kabra and Shivam Stock Broking have contributed around 92 per cent of the total turnover of its shares.
It was also clear that most of the trades were executed as cross deals (wherein the buying and selling broker is the same) and the members acted as counter party of their own transactions.