1. Harshad Mehta: “The Big Bull” Gone Wild…
Mehta’s Trade Mechanism
Broker
Bank X
Fake BRs
issuedBank A
Issued Govt. Bonds
taken from Bank B
Issued cheques favouring
Broker on Day 1
Bank B
Promised to pay on Day 2 &
presented BRs
Sold Govt. Bonds on
Day 1
Repaid money taken
from Bank C on Day 2
Bank C
Issued cheques favouring
Broker on Day 2
Issued Govt. Bonds
taken from Bank D
Bank D
Promised to pay on Day 3 & presented
BRs
Sold Govt. Bonds on
Day 2
Stock Markets
Excess Funds on hands
channelised towards buying
stocks
SellerofSecuritiesBuyerofSecurities
SellerofSecuritiesBuyerofSecurities
Sources: topcafirms.com, BusinessToday; Note: RF Deal: Secured short term loan from one bank to another; BR: Acts as receipt for the money received by the selling Bank

2. Ketan Parekh: Scam led by a “Pentafour Bull”
Sources: Reuters, BusinessToday, DNA; Note: Circular Trading: trade done by a group of people among themselves to rig the share price
The Story Continues….
• Parekh was convicted in 2008 for being involved in engineering the technology stocks scam in 1999-2001
• Also convicted with one year imprisonment for the transaction he conducted in the 1992 stock scam, involving a unit of Canara Bank
• Out of the Rs. 800 crore liability payable towards Madhavpura Bank, Parekh repaid 50% of the amount
• Currently, he is serving a period of disqualification from trading in the Indian bourses till 2017
• However, Parekh is still very much active in the stock market through “Benami” entities and never left the markets in the first place
• As per the Intelligence Bureau Report, recently his cartel was involved in rigging share prices of many stocks
Circular Trading Mechanism
KP Sells stock
to Trader A
A sells same
stock to Trader BB sells same
stock to Trader C
C sells same
stock to Trader D
D sells same
stock to KP
Stock Price
Price Rigging

3. Comparative Analysis of Both Scams
Sources: http://flame.org.in/knowledgecenter/scam.aspx

4. Impact on Stock Markets and Indian Economy
Sources: http://www.slideshare.net/
● The immediate impact of these scams were
sharp fall in the share prices and indices
● Post Harshad Mehta Scam, markets lost Rs.
0.1mn crore loss in market capitalisation
● The Government’s liberalization policies came
under severe criticism
● Subsequently, these policies were put on hold
for a while
● SEBI, the securities market regulator,
postponed sanctioning of private sector mutual
funds
● The entry of much talked about foreign
pension funds and mutual funds became the
remotest possibility
● The Euro-issues planned by many Indian
Cos. Were delayed

5. Measures taken by SEBI against scams
Sources: icmrindia.org; Note: ALBM: Automated Lending and Borrowing Mechanism; BLESS: Borrowing and Lending of Securities Scheme
● Securities and Exchange Board of India (SEBI) was established in April ’88
● Established with an objective of protecting the rights of small investors and
regulating and developing the stock market in India
● Post Mehta Scam in 1992, the GoI passed “SEBI Act 1992” and conferred
statutory powers to it

6. Has SEBI lived up to its purpose??!
Sources: indianblogger.com, ismb-blogspot.in, icmrindia.org
● While Mehta scam empowered SEBI to regulate markets more effectively,
several other scams forced it to ensure that markets operate transparently
and efficiently
● However, post Mehta scam, several scams came to light, casting doubt on
the efficiency of SEBI as a regulatory body
● Although many reforms are introduced by SEBI, there remains significant
lapses in the law implementation and enforcement
● Certain areas wherein SEBI needs to
think upon and take action includes:
─ Bear/Bull Cartels
─ Insider Trading
─ Circular Trading
─ Uniform settlement cycle
● A few actions taken by SEBI were
criticized of it being clueless about its
supervisory duties
● Its high time that market regulators implement appropriate measures else the
ghost from past will continue haunting the Indian bourses

7. Has SEBI lived up to its purpose??!
Sources: indianblogger.com, ismb-blogspot.in, icmrindia.org
● While Mehta scam empowered SEBI to regulate markets more effectively,
several other scams forced it to ensure that markets operate transparently
and efficiently
● However, post Mehta scam, several scams came to light, casting doubt on
the efficiency of SEBI as a regulatory body
● Although many reforms are introduced by SEBI, there remains significant
lapses in the law implementation and enforcement
● Certain areas wherein SEBI needs to
think upon and take action includes:
─ Bear/Bull Cartels
─ Insider Trading
─ Circular Trading
─ Uniform settlement cycle
● A few actions taken by SEBI were
criticized of it being clueless about its
supervisory duties
● Its high time that market regulators implement appropriate measures else the
ghost from past will continue haunting the Indian bourses