Jayant financial scams in india(related to share market)
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Harshad Mehta triggered a major securities scam in India in 1992 by illegally diverting funds from banks to inflate stock prices. He used loopholes in the banking system and illegal practices like "ready forwards" to prop up the stock market. When the scam was exposed by a journalist, the stock market crashed sharply, wiping out billions in market value. Mehta was arrested and banned from trading, and the scam significantly undermined trust in the Indian market. It led to reforms to prevent such illegal manipulation and protect small investors.
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Jayant financial scams in india(related to share market)
- 1. Financial Scams in India (Securities Scam 1992 Case)
- 2. What is Scam? Definition: obtaining money by means of deception including fake personalities, fake photos, fake template letters, non-existent addresses and phone numbers, forged documents. Also called Plunder Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws.
- 3. Top 10 Financial Scams in India • Insurance Scam (1947) • Securities Scam (1992)- Harshad Mehta • UTI Scam (2001) • Home Trade (2000) • Securities Scam (2001) Ketan Parekh • DSQ Software (2001) Conti…
- 4. • Satyam (2009) • Fake Stamp Papers (2006) - Abdul Karim Telgi • IPO Scam (2005) The list goes on & on & moreover there are continuous additions to the same.
- 5. 'Big Bull‘ of Indian stock market???
- 6. Harshad Mehta Timeline • Harshad Shantilal Mehta was born on 29 July 1953, at Paneli Moti, Rajkot district, In a Gujarati Jain family • After completing his secondary education, Harshad left for Bombay and joined Lala Lajpat Rai College for a Bachelor’s degree in Commerce. • Harshad Mehta started his working life as an employee of the New India Assurance Company.
- 7. • In the early eighties he quit his job and sought a job with stock broker P. Ambalal affiliated to Bombay Stock Exchange. • He became a jobber on BSE for stock broker P.D. Shukla after that. • In 1981 he became a sub-broker for stock brokers J.L. Shah and Nandalal Sheth. • By 1991, Mr Mehta had become the most recognisable and revered icon of the stock market. • Mehta died in 2002 with many litigations still pending against him
- 8. • Diversion Of Funds. • Use Of Ready Forward (RF) To Maintain SLR(Statutory Liquidity Ratio). • Creative Accounting. • Intra- Day Trading. What is Harshad Mehta Scam All About?
- 9. HIS FAVORITE STOCKS INCLUDED • ACC • APOLLO TYRES • RELIANCE • TATA IRON AND STEEL CO. (TISCO) • BPL • STERILITE • VIDEOCON
- 10. What he did? • 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
- 13. • The index fell from 4500 to 2500 representing a loss of Rs. 100,000 crores in market capitalization. • There was a chaotic situation in the market. • The Government liberalization policies came under criticism. • It received political pressure and bad press. • The Securities Exchange Board of India (SEBI) postponed sanctioning of private sector mutual funds. Impact Of The Scam
- 14. After Effects • HM WAS ARRESTED AND BANED FOR LIFE FROM TRADING IN THE STOCK MARKETS • MAJOR CULPRITS WERE BROKERS, BANKERS AND FINANCIAL INSTUTIONS. • HM WAS CHARGED WITH 72 CRIMINAL OFFENCES. A SPECIAL COURT ALSO SENTENCED SUDHIR MEHTA, HARSHAD’S BROTHER, 6 OTHERS, INCLUDING FOUR BANK OFFICIALS.
- 15. • Lifestyle. • 31st December 2001- The Death Of The Bull. • Remembered as the architect of the Rs.50 billion scam. The End Of Harshad Story
- 16. • Be aware if someone Is over loyal o you later he may project the true colors. • Carrying on with illegal activities may lead to exploitation of self image in public. • God has gifted us with powerful organ called “BRAIN” to succeed in life through legal means and not by dumping others. Learning
- 19. Ketan Parikh
- 20. What he did?
- 21. How he caught
- 22. After Effects
- 23. Thank You!
- 24. Speculators • Bull • Bear • Stag • Lame Duck • Arbitrageur
Editor's Notes
- Illegal Trading System : Indian Jargons= Dabba System, Karb System, Patiya System, Badla System Badla Rigging Cornering Wash Sales Dividend Stripping Bonus Stripping
- HE WANTED TO BECOME THE MOST SUCCESSFUL BROKER- THERE BY HE EARNED THE NAME OF “THE BIG BULL”
- 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”
- At the peak of his glory, Mr Mehta lived in a 15,000 sq.ft. house with its private swimming pool and golf patch. His lavish lifestyle and flashy cars were the stuff known only of movie stars. EXPLOITING THE LOOP HOLE IN THE BANKING SYSTEM
- The Ready Forward Deal (RF) is in essence a secured short term (typically 15 day) loan from one bank to another bank. The lending is done against Government Securities exactly the way a pawnbroker lends against jewelry. In fact one can say that the borrowing bank actually sells the securities to the lending bank and buys them back at the end of the period of the loan at (typically) a slightly higher price
- EXPLOITING THE LOOP HOLE IN THE BANKING SYSTEM Mehta and his associates siphoned off funds from inter-bank transactions and bought shares heavily at a premium across many segments, triggering a rise in the Sensex . When the scheme was exposed, banks started demanding their money back, causing the collapse. According to investigators, he had devised an ingenious way of using bank receipts to feed the stock market frenzy.
- EXPLOITING THE LOOP HOLE IN THE BANKING SYSTEM Mr Mehta and his brothers were arrested by the CBI on November 9 for allegedly ``misappropriating (in 1992) more than 27 lakh shares of about 90 companies, including Sensex heavyweights such as ACC and Hindalco, through forged share transfer forms.'' The total value of the shares was placed at Rs 250 crore
- LIFESTYLE (FLASHY CARS AND LIFE LIKE A CELEBRITY) 31 ST DECEMBER 2001- THE DEATH OF THE BULL FOREVER REMEMBERED AS THE ARCHITECT RS. 50 BILLION SCAM
- In less than 2 months following the discovery of the scam, the stock prices dropped by over 40%, wiping out market value to the tune of Rs. 100,000 crores . The scam also had an impact on the liberalization policies being pursued by the government with several reform measures being put on hold. The immediate impact of the scam was a sharp fall in the share prices. The index fell from 4500 to 2500 representing a loss of Rs. 100,000 crores in market capitalization. The Securities Exchange Board of India (SEBI) postponed sanctioning of private sector mutual funds.
- The immediate impact of the scam was a sharp fall in the share prices. The index fell from 4500 to 2500 representing a loss of Rs. 100,000 crores in market capitalization. The government's liberalization policies came under severe criticism after the scam, with Harshad Mehta and others being described as the products of these policies. Bowing to the political pressures and the bad press it received during the scam, the liberalization policies were put on hold for a while by the government. The Securities Exchange Board of India (SEBI) postponed sanctioning of private sector mutual funds. Bowing to the political pressure and the bad press it received during the scam, the liberalization was put on hold for a while by the government SEBI postponed sanctioning of private sector mutual fund
- Mr Mehta perhaps had as many admirers as critics. If he was loathed by some, he was revered by many. But almost all of them admit that he caused a ``change'' in the Indian stock market, permanently. Mehta security scandal also became the flavor of Bollywood with Sameer Hanchate's film Gafla. the man who was the first broker to become a mega-star of the Indian capital markets and fire the greed and imagination of every middle class Indian in the early 1990s.
- The story is quit similar only the star cast has changed .In 1992 scam it was harshad mehta now its ketan parekh. Both are big bulls Both big bulls use to buy stocks at rock-bottom prices and push it up