SIP REPORT Risk management mechanism in Stock Exchange How efficient is it

1
A
REPORT
ON
“RISK MANAGEMENT MECHANISM IN
STOCK EXCHANGE - HOW EFFICIENT IT
IS?
AN ANALYSIS
UNDER
BHUBANESWAR STOCK EXCHANGE
By
SMRITIREKHA CHOWDHURY, Regd No-1406278056
GLOBAL INSTITUTE OF MANAGEMENT
BHUBANESWAR

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A STUDY ABOUT
“Risk management mechanism in
stock exchange – how efficient is it? ”
A Report Submitted to
Global Institute Of Management
In partial fulfillment of the requirements for award of the Degree in
Management
BY
SMRITIREKHA CHOWDHURY
REGD NO- 1406278056
MBA
Under the guidance of
Name of Corporate Guide
with Company’s name
Mr.BIPIN DUTTA
Bhubaneswar Stock Exchange
Name of Faculty Guide with college’s
name
Prof. B.R.MOHANTY
GLOBAL INSTITUTE OF
MANAGEMENT

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CERTIFICATE
Certified that the project work with the title “Risk
management mechanism in stock exchange – how
efficient is it?” undertaken by SMRITIREKHA
CHOWDHURY, was conducted under my guidance and
supervision. She has designed the research, collected the
data, analysed the results, interpreted the findings and
observations and prepared the report.
Faculty Guide
Prof. B R Mohanty

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DECLARATION
I hereby declare that the project report with the title “Risk
management mechanism in stock exchange – how efficient is it?”,
being submitted to Global Institute of Management in partial
fulfilment of the requirements for award of the degree of Post
Graduate in Management, is an original piece of research work
carried out by me. It has not been published/awarded elsewhere, nor
has it been submitted in full or part for any other degree or diploma.
Smritirekha chowdhury
Date-

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ACKNOWLEDGEMENTS
The 40 Days of summer internship gave me a very good
opportunity for learning new things, with timely and successful
completion of project. These all have been made possible by the
efforts of many individuals and therefore it is necessary for me to
express my sincere thanks to each one of them.
First, I would like to thank Mr. Debraj Biswal, MD and CEO of
Bhubaneswar Stock Exchange for allowing us to conduct our
summer internship project in the organization.
I take this opportunity to express my deep sense of gratitude to
my company guide, Mr. Bipin Dutta, Assistant Manager,
Bhubaneswar Stock Exchange, for his wonderful guidance on the
topic of the project undertaken by me and also for his immense
support by giving enough clarifications to my doubt whenever it
was required, throughout the journey of my internship.
Without his direction, it would have been impossible for me to
proceed and give my best. He has significantly contributed in
making concepts related to my work simple to understand. Every
time he kept motivating me to come up with something new in
my study. I am also thankful to the Managing Director of
Bhubaneswar stock exchange for accepting and giving me the
chance of doing SIP.
I am also very much thankful to my faculty guide, Prof. Biswa
Ranjan Mohanty, for suggesting me to undertake internship in
Bhubaneswar Stock Exchange. He has constantly motivated me
to deliver my best and also gave right information in the quickest
possible time. I am thankful to him for inspiring me to do case
study or research work which made me enthusiastic for my work.
At last, I would like to thank my seniors and family members,
who gave me nice support in making this project successful.

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TO WHOM IT MAY CONCERN
This is to certify that the project entitled “RISK
MANAGEMENT MECHANISM IN STOCK EXCHANGE –
HOW EFFICIENT IS IT?” is a genuine interim report
carried out by “Smritirekha Chowdhury” of Global
Institute Of Management, Bhubaneswar at
Bhubaneswar stock exchange, Bhubaneswar during
the project tenure 1st June to 10th July.
She has given good performance throughout the training
period. I wish her all the best for her bright career.
(Corporate Guide)
Place: Bhubaneswar MR. BIPIN DUTTA
Date: Asst. Manager
. Bhubaneswar Stock Exchange
Bhubaneswar

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CONTENTS
CHAPTERS Page no
1. Abstract 9
2. Company Analysis
2.1 Company Profile
2.2 Business Model of BhSE
2.3 SWOT Analysis of BhSE
10
10
10
15
3. Introduction
3.1 Objective of study
3.2 Data sources
3.3 Research Methodology
16
18
19
19
4. Investment in securities and role of stock exchange
4.1 Confidence of investors. How securities market
define it
4.2 Investment in securities rest on 3 objectives
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27
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5. Risk management
5.1 Common types
5.2 Risk managementfor trade
5.3 Portfolio risk management
30
30
31
31
6. Risk Managementengines of stock exchange for equity
market
6.1 At trading level
6.2 At trader’s level
6.3 At investors’level
33
33
33
34
7. Investors to take care of risk
7.1 Contract Note
7.2 Other responsibilities
35
35
37
8. Usage of risk managementweapons
8.1 On rolling basis
8.2 As and when required
8.3 In case of default
39
39
40
41
9. Case study 43

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Caselet 1:HarshadMehta Scam
Caselet 2:Ketan Parekh Scam
Caselet 3: A ‘parallel’crisis in Calcutta Stock Exchange-SGFto
rescue
Caselet 4: North Star Gems (India)Limited-Market
manipulation and price rigging
Caselet 5: Maruti Organics Ltd-Not compliancewith KYC
norms & Margin Requirements
Caselet 6: Market Surveillance
44
50
56
60
61
62
10.Findings 65
11.Conclusion 72
12.Bibliography 74

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1. ABSTRACT
Securities market is an essential platform for the growth and
development of any economy. Securities market offers individuals,
large, small and medium-scale enterprises with a broader menu of
financial services and financial instruments like equities, debentures,
government debt, derivatives and other securities. Further, since retail
investors place an increasing proportion of their money in mutual
funds, other collective investment vehicles, stocks etc., securities
market therefore plays an important role for the growth of individual
wealth. However, securities market requires a sound and effective risk
management system that is necessary in building up the investors’
confidence in the market by ensuring fair and efficient transactions
and also reducing systemic risk, so that investors do not hesitate to
invest because of risks involved in stock market operations.
The paper aims to study risk management framework of stock
exchanges and how it works and also, at which level, what kind
mechanism is implemented.
Finally, the paper presents a detailed case analysis on “Different
securities scams happened in Indian Stock Market” and analysis of
each scam to understand impact on stock market and investors.

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2. Company Analysis
2.1 Company profile
Bhubaneswar Stock Exchange Ltd. (BhSE) has been functioning
as a recognized Stock Exchange in the state of Orissa for about
20 years. It was initially incorporated on 17 April,1989 as a
Public Company, limited by guarantee with an objective to
facilitate, assist, regulate or control the business of buying,
selling or dealing in stocks, shares and like securities. Govt. of
India granted recognition to the BhSE on 5 June,1989 under the
provisions of the Securities Contracts (Regulation) Act,1956 for
an initial period of five years. Thereafter, the recognition of BhSE
is being renewed from time to time by Securities and Exchange
Board of India (SEBI).
Subsequent to the amendment to the Securities Contracts
(Regulation) Act,1956 during the year 2004 by the Govt. of India
in order to provide for corporatization and demutualization of the
stock exchanges in the country, BhSE, first in order to become a
corporatised entity, was converted from a company limited by
guarantee to a company limited by shares on 9 December, 2005
by way of fresh incorporation under the Companies Act,1956.
Further, during the year 2007 BhSE successfully diluted its
share capital to public in compliance with the requirement of
demutualization in order to ensure at least 51% of paid up share
capital are held by the persons other than the stock-broker
shareholders.
2.2 Business Model of BhSE
Inter-connectivity
BhSE has played an instrumental role, among others, in mooting
the idea of establishing of an Inter-connected Market System
(ICMS). This effort resulted in establishing “Inter-connected Stock
Exchange of India of Ltd. (ISE)” at Navi Mumbai. The object of
establishing ISE was to provide a nationwide equity market

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through the trading members of participating Stock Exchanges.
Trading operation was carried out on the ISE segment for quite
sometimes. However, in the presence of nationwide terminals
provided by National Stock Exchange (NSE) and Bombay Stock
Exchange (BSE), ISE trading activities did not go a long way in
absence of liquidity in its segment. ISE, as an alternative
measure to provide active trading segments in the securities
market to the trading members of its participating Stock
Exchanges as well as its dealers, floated a wholly owned
subsidiary company, namely, ISE Securities & Services Ltd. (ISS)
which in turn obtained the trading membership of NSE and BSE.
At present the trading members of BhSE are conducting trading
on NSE and BSE segments as the registered sub-brokers of ISS.
Management:
The affairs of the BhSE are controlled and supervised by the
Board of Directors. The day to day affairs are managed by the
Managing Director of the Stock Exchange. The Board of Directors
of the Stock Exchange comprises of 8 Directors which includes, 4
Public Interest Directors nominated by SEBI and 4 Shareholder
Directors appointed by the shareholder of the BhSE and
Managing Director who is the ex-officio Director of the Board.
Trading Operation:
The trading and settlement operation of the BhSE was
computerized since inception. The Exchange switched over from
“out-cry system” of trading to “Screen Based Trading” with effect
from 20 May,1997. However, the trading on the BhSE segment is
presently dispensed with the instruction of SEBI in the want of
adequate market infrastructure and regulatory mechanism.

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Settlement System:
The settlement at the Exchange is carried out on “Daily Rolling
Basis” (T+2) as per the SEBI Guidelines. Pay-in/pay-out, in terms
of Settlement, is carried out well in time through the centralized
banking system of the Stock Exchange. BhSE has established
Branch of Canara Bank, within its campus to facilitate the pay-
in/pay-out activities as well as the banking transactions of the
Stock Exchange and its trading members.
Clearing House:
BhSE has its own Clearing House. The transactions conducted
by the trading members are settled by the Clearing House of the
Stock Exchange in accordance with the prescribed settlement
program under a “Centralized Delivery and Payment System”.
Depository Participant Services
BhSE is a registered Depository Participant (DP) of Central
Depository Services (India)
Ltd. (CDSL) and has been providing DP services to the investors
in securities.
Listing of Securities
The total companies listed with BhSE are 46. Pursuant to
enforcement of liberal regulatory norm i.e delisting guidelines,
2003 issued by SEBI and subsequent withdrawal of mandatory
provision requiring for listing of securities of companies on their
respective regional stock exchange , by the Government of India,
many companies have sought delisting of their securities from
the exchange causing an adverse impact on the revenue of the
exchange.

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Primary Market
BhSE has been playing an active role for the growth of primary
market activities with the support of its trading members. The
Stock Exchange ensures promotional steps for participation of
investing public at a large scale in the Initial Public Offers
(IPOs)/Public Issues of several companies.
Customers’ Protection Fund
BhSE has established a Statutory Fund namely, “Bhubaneswar
Stock Exchange Customers’ Protection Fund” with an objective to
protect the customers from the risk of defaulter trading members.
As per the Rules, presently a customer is entitled to be
indemnified to the extent of Rs.50,000/- towards his legitimate
claim against a defaulter trading member of the Stock Exchange.
The size of the corpus as on 31 March ,2014 was Rs. 53, 90,399
Investors’ Service Cell
BhSE has an “Investors’ Service Cell” to redress the investors’
grievances ,ensuring protection of the investors. It promptly
attends the complaints lodged by the investors against
companies as well as the trading members of the Stock
Exchange. The Investors’ Service Cell undertakes due care to
build up confidence of the common investors in the securities
market.
Settlement Guarantee Fund
The stock exchange in terms of its Bye- laws, has established
Settlement Guarantee Fund(SGF) with the approval of SEBI. The
corpus of SGF as at 31 March, 2014 was Rs. 1,67,57,457

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Current Activities other than trading operation
Apart from trading operation, BhSE is engaged in promotion and
development of securities market in the interest of the investing
public in a big way such as –
Investors’ Awareness Programme
BhSE is conducting investors’ awareness programmes by way of
seminars/workshop from time to time for education and
awareness of investing public in securities. The aim of the BhSE
is to have at least 5-6 awareness programmes in a year at
different location of the State of Odisha.
Securities Market Training Programme
BhSE is providing a Certificate Course, namely, “Basics of Capital
Market”. With the expansion of capital market, BhSE aims at
undertaking practical oriented training programmes for the
students of Commerce and B-Schools in a big way for the youths
who want to make their career in securities market. At present,
BhSE is engaged in imparting training to the students of various
management institutes.
Students Assistance Programme
The students of a number of Institutes and B-Schools visit BhSE
either directly or sponsored by their institutes every year for
assistance in preparation of their project papers. BhSE assists
and supports those students in their project work by providing
necessary guidance and securities market information.

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2.3 SWOT Analysis of BhSE
STRENGTHS WEAKNESSES
 Provides smooth clearing
and settlement process.
 Has adequate internal
checks and internal
control systems which are
commensurate with its
size and nature of its
business.
 The exchange has corpus
of SGF of Rs. 1,67,57,457
& IPF of Rs. 53,90,399.
 Provides other services
like Investors’ Awareness
Programme, Securities
Market Training
Programme, Students
Assistance Programme.
 Only 46 companies are
listed in the exchange
generating less revenue
for exchange.
 Very few employees.
OPPORTUNITIES THREATS
 Business tie-up with other
national level stock
exchange.
 Merger /consolidation of
the exchange with other
exchanges viz. MCX-SX,
Calcutta Stock Exchange
and Inter-Connected Stock
Exchange of India.
 Alternate business plans
for survival of the entity.
 Continuous decrease in
profit, making difficult for
exchange to survive,
which subsequently may
cause to shift in other
business.

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3. INTRODUCTION
Financial Markets are broadly classified into money market and
capital market. Money market is associated with trading of
instruments for raising of short term funds, having maturity
period of less than 1 year, whereas capital market is associated
with trading of instruments for raising long term funds having
maturity of more than 1 year. Capital market/Securities market
is in turn divided into primary and secondary market, also called
as stock market.
In primary market, creation and sale of new issues takes place,
whereas in secondary market, securities already issued in the
primary market are traded. There are 3 kinds of participants in
securities market: the issuer of securities, the investor in
securities, and the intermediaries. The issuers issue securities to
raise funds; the investors invest their savings in the securities for
getting returns in the form of some income either as a fixed
regular income of dividends /interest or capital gains in future.
The role of intermediaries is to act as agents or middlemen to
bring together users and suppliers of funds, in return for a
commission. There are large variety and number of
intermediaries providing various services in the Indian securities
market. Indian securities market has two major Market
Infrastructure Institutions i.e. BSE (Bombay Stock Exchange,
Ltd) and NSE (National Stock Exchange, Ltd.). They provide
platform for trading of securities.

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However the process of mobilizing the resources needs to be
carried out under the supervision of the regulators. The
regulators develop fair market practices and take responsibility of
protecting the interests of the investors. The Market Regulator,
Securities and Exchange Board of India (SEBI) have taken several
measures to improve the integrity, fairness and transparency at
both new issue and trading levels. At trading level in particular,
SEBI has, from time to time, put in place various risk
containment measures to address the risks involved in the cash
and derivatives market. These measures have successfully
addressed the market risks. However, to keep up with the
dynamic state of the market, risk management systems cannot
remain static and has to constantly address the changing risk
profile of the market. Now the question is, why one should be
interested in knowing what are the risks and how stock
exchanges take care of such risk. Since a common man invests
his money in stock market, his interest has to be protected and
any kind of obligations should be fulfilled. We can say that Risk
Management is necessary at 3 particular levels for obvious
reasons -
At Trading Level
* Business continuity
* Smooth and faster settlement of transactions
* Countering high degree volatility
* Countering insider trading

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* Combating information asymmetry and market
vagaries
* Safer market for investment
At Trader Level
* Fulfillment of business obligation
* Avoidance of risk of default
At Investor Level
* Timely receipt of claim
* Protection of interest
* Receipt of legitimate claim against a defaulter
* Redressal of grievance
* Reliance on the market
At each level, to address different issues, stock exchange is
equipped with different risk management engines.
3.1 Objective of study
Following are the objectives of study:
 To understand the stock market operations, covering equity
market
 Risk management techniques operating in equity market.
 Study of scams and their origination.

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 To analyze how present risk management framework can
avoid such scams.
 To analyze how efficient present risk management
framework is.
3.2 Data sources
Data has been collected from secondary sources, i.e from stock
exchanges website mainly from National Stock Exchange of
India Ltd. and Bombay Stock Exchange Ltd. and Securities &
Exchange Board of India (SEBI).
3.3 Methodology
The methodology used in this study is case based and some
real time incidents data, it also includes secondary data.

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4. Investment in securities and
role of stock exchange
Though the primary role of any stock exchange is to provide
platform for trading of securities and raising funds through the
way of debt and equity but its importance is not limited only up
to this point.
The role of stock exchange is varied and it plays a major role in
the development of economy of a country.
Role of stock exchange in economic
development and Indian economy:-
Raising capital for businesses
The stock market is a place where entrepreneurs can raise funds
for setting up new business or for expansion of existing business
by issuing of shares and securities. Exchanges help companies to
capitalize by selling shares to the investing public.
Mobilizing saving for investment
The people can deploy their savings by investment in shares.
Shares are lucrative investments giving higher returns to
investors. At the same time investors’ money can be used by
company for further investments resulting in overall growth of
company. These funds can be directed for benefits of several

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economic sectors such as agriculture, commerce and industry
thereby leading to a stronger economic growth and higher
productivity levels and firms.
Facilitating company growth
Companies view acquisitions as an opportunity to expand
product lines, increase distribution channels, hedge against
volatility, increase its market share, or acquire other necessary
business assets. A takeover bid or a merger agreement through
the stock market is one of the simplest and most common ways
for a company to grow by acquisition or fusion.
Creating investment opportunities for small
investors
Investing in shares is open to both the large and small equity
investors because a person buys the number of shares that he
can afford. A Stock Exchange provides opportunity for small
investors to own shares of the same companies as large
investors.
Government capital-raising for development projects
Government also sometimes to finance the infrastructure projects
like construction of roads, bridges, and etc. approach debt
market of stock exchange to raise funds and start selling bonds
thus taking loan from public.

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Barometer of the economy
The stock market indices may go up or down. When index rises,
we say share prices of most of the companies have gone up which
means most of the companies or sectors are doing well. This
implies that our economy also doing well and growing. Whereas
in case of economic recession, depression, or financial crisis,
stock market crash and share prices fall. Therefore, the
movement of the stock index can be an indicator of the general
trend in the economy.
Role of stock exchanges in capital market of
India:-
Stock Exchanges play a crucial role in the consolidation of a
national economy in general and in the development of industrial
sector in particular. It is the most dynamic and organised
component of capital market. Especially, in developing countries
like India, the stock exchanges play a cardinal role in promoting
the level of capital formation through effective mobilisation of
savings and ensuring investment safety.
Effective Mobilization of savings
Stock exchanges provide organised market for an individual as
well as institutional investors. They regulate the trading
transactions with proper rules and regulations in order to ensure
investor's protection. This helps to consolidate the confidence of
investors and small savers. Thus, stock exchanges attract small

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savings especially of large number of investors in the capital
market.
Promoting Capital formation
The funds mobilised through capital market are provided to the
industries engaged in the production of various goods and
services useful for the society. This leads to capital formation and
development of national assets. The savings mobilised are
channelised into appropriate avenues of investment.
Wider Avenues of investment
Stock exchanges provide a wider avenue for the investment to the
people and organisations with investible surplus. Companies
from diverse industries like Information Technology, Steel,
Chemicals, Fuels and Petroleum, Cement, Fertilizers, etc. offer
various kinds of equity and debt securities to the investors.
Online trading facility has brought the stock exchange at the
doorsteps of investors through computer network. Diverse type of
securities is made available in the stock exchanges to suit the
varying objectives and notions of different classes of investor.
Necessary information from stock exchanges available from
different sources guides the investors in the effective
management of their investment portfolios.
Liquidity of investment
Stock exchanges provide liquidity of investment to the investors.
Investors can sell out any of their investments in securities at

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any time during trading days and trading hours on stock
exchanges. Thus, stock exchanges provide liquidity of
investment. The on-line trading and online settlement of demat
securities facilitates the investors to sell out their investments
and realise the proceeds within a day or two. Even investors can
switch over their investment from one security to another
according to the changing scenario of capital market.
Investment priorities
Stock exchanges facilitate the investors to decide his investment
priorities by providing him the basket of different kinds of
securities of different industries and companies. He can sell stock
of one company and buy a stock of another company through
stock exchange whenever he wants. He can manage his
investment portfolio to maximise his wealth.
Investment safety
Stock exchanges through their by-laws, Securities and Exchange
Board of India (SEBI) guidelines, transparent procedures try to
provide safety to the investment in industrial securities.
Government has established the National Stock Exchange (NSE)
and Over The Counter Exchange of India (OTCEI) for investors'
safety. Exchange authorities try to curb speculative practices and
minimise the risk for common investor to preserve his
confidence.

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Wide Marketability to Securities
Online price quoting system and online buying and selling facility
have changed the nature and working of stock exchanges.
Formerly, the dealings on stock exchanges were restricted to its
head quarters. The investors across the country were absolutely
in dark about the price fluctuations on stock exchanges due to
the lack of information. But today due to Internet, on line quoting
facility is available at the computers of investors. As a result,
they can keep track of price fluctuations taking place on stock
exchange every second during the working hours. Certain T.V.
Channels like CNBC are fully devoted to stock market
information and corporate news. Even other channels display the
on line quoting of stocks. Thus, modern stock exchanges backed
up by internet and information technology provide wide
marketability to securities of the industries. Demat facility has
revolutionised the procedure of transfer of securities and
facilitated marketing.
Financial resources for public and private sectors
Stock Exchanges make available the financial resources available
to the industries in public and private sector through various
kinds of securities. Due to the assurance of liquidity, marketing
support, investment safety assured through stock exchanges, the
public issues of securities by these industries receive strong
public response (resulting in oversubscription of issue).

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Funds for Development Purpose
Stock exchanges enable the government to mobilise the funds for
public utilities and public undertakings which take up the
developmental activities like power projects, shipping, railways,
telecommunication, dams & roads constructions, etc. Stock
exchanges provide liquidity, marketability, price continuity and
constant evaluation of government securities.
Indicator of Industrial Development
Stock exchanges are the symbolic indicators of industrial
development of a nation. Productivity, efficiency, economic-
status, prospects of each industry and every unit in an industry
is reflected through the price fluctuation of industrial securities
on stock exchanges. Stock exchange sensex and price
fluctuations of securities of various companies tell the entire
story of changes in industrial sector.
Barometer of National Economy
Stock exchange is taken as a Barometer of the economy of a
country. Each economy is economically symbolized (indicators)
by its most significant stock exchange. New York Stock
Exchange, London Stock Exchange, Tokyo Stock Exchange and
Bombay Stock Exchange are considered as barometers of U.S.A,
United Kingdom, Japan and India respectively. At both national
and international level these stock exchanges represent the
progress and conditions of their economies.

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Thus, stock exchange serves the nation in several ways through
its diversified economic services which include imparting liquidity
to investments, providing marketability, enabling evaluation and
ensuring price continuity of securities.
4.1 Confidence of investors. How does
securities market define it?
Investors may be an individual or institutions who subscribe to
the securities issued in stock market. The interest of investors
needs to be protected so as to generate confidence among them.
If investors do not have confidence in the stock market or on its
regulatory mechanism, then they may hesitate to invest their
money in any kind of securities. People would rather prefer to
keep their money in the banks in the form of safe fixed deposit
and may not even turn to stock market Companies will also find
it difficult to raise funds. As a result, not enough investments will
not take place in economy. Finally, both private and public
corporate sectors will not grow in the absence of investment and
this will lead an economy to suffer a lot. Therefore, a prudent
regulatory framework has been designed to enjoy such confidence
of investors. To ensure fair, efficient, transparent market,
securities markets are governed by 5 main Acts.
 The SEBI Act, 1992; which provides power to SEBI for
protecting the interests of investors in securities, promoting the
development of the securities market, and regulating the
securities market. Its regulatory power extends over corporate in

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the issuance of capital and transfer of securities, and also to all
intermediaries and persons associated with the securities
market. It can conduct enquiries, audits, and inspection for all
concerned reasons. It has the powers to register and regulate all
market intermediaries, as well as to penalize them in case of
violations of the provisions of the Act, Rules, and Regulations.
 The Companies Act, 1956, which sets the code of conduct
for the corporate sector in relation to issuance, allotment, and
transfer of securities, and disclosures to be made in public
issues.
 The Securities Contracts (Regulation) Act, 1956, which
provides for the regulation of transactions in securities through
control over stock exchanges.
 The Depositories Act, 1996 which provides for electronic
maintenance and transfer of ownership of demit (dematerialized)
shares. The Act ensures free transferability of securities with
speed, accuracy, and security.
 The Prevention of Money Laundering Act, 2002, which
provides measures to prevent money laundering and prescribes
the punishment for such offence.
4.2 Investment in securities rest on three objectives
Investors’ Protection
Investors should be protected from misleading, manipulative or
fraudulent practices, including insider trading, front running
and the misuse of client assets.

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Full disclosure of information which might be important for an
investor to make investment decisions is the most important
means for ensuring investors’ interest protection.
Ensuring fair, transparent and efficient market
Efficient market is one where investors have fair access to market
or have correct information about the prices of securities. Also
not a single investor is able to influence the market or share
price. In a fair, transparent and efficient market, dissemination of
any relevant information is widespread and gets reflected in the
share price or price formation process. Market structure does not
unduly favor some market users over others. In violation of these,
Regulation should detect, prevent and penalize market
manipulations and any other unfair trading practices.
Reduction of Systemic Risk
Regulation should seek to reduce the impact of failure of any
market intermediary in fulfilling its obligations. Market
intermediaries should, therefore, be subject to adequate and
ongoing capital and other important requirements. If necessary,
an intermediary should be able to wind up its business without
making loss or any damage to its customers and counterparties.
Prudent supervision and effective utilization of risk management
tools are essential to ensure efficient clearing and settlement
process in the interest of the market as well as of investors.

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5. What is Risk Management?
Risk management is the process of measuring, or assessing risk
and then developing strategies to manage the risk while
attempting to maximize returns. Typically involves utilizing a
variety of trading techniques, models and financial analyses.
The potential return from any investment is generally depending
to the amount of risk the investor is willing to assume.
Investors will not take on greater risks without the possibility of
higher earnings. This is called the risk premium.
5.1 Common types of Risk
There are two common risks that investors should notice them
well:
Market Risk: The possibility that the value of financial markets
rise or fall.
Inflation Risk: The risk that rising prices of goods and services
over time, Inflation risk is also known as 'purchasing-power risk'
and it is one of the most important factors for long-term
investing.
You can't control the inflation risk, but with a good strategy you
can manage and control the affect of market risk on your stocks.
A professional trader always tries to understand and control
portfolio risk. Before entering into any trade, good traders first
think about how much risk to take and how much risk exposure
comes with a particular trade selection. Only then do they allow
themselves to think about how much profit they stand to make.

31
Prudent investors always close their position and exposure if they
determine that a portfolio carries too much risk.
5.2 Risk Management for a Trade
1- Before you decide to trade consider to these fundamental
principles:
2- Before you trade a stock, know how much you are willing to
lose.
3- Check the stock to be sufficiently liquid, can you buy or sell
promptly?
4- Determine the cut-loss level before trading.
5- Determine your profit target (take-profit-level).
6- Buy the stock only at an acceptable price level. Use a limit
order when you buy a stock.
7- Immediately after the trade has been confirmed, enter the
stop-loss-at- market order at your predetermined stop-loss level.
8- Take profit when the trade reaches your profit target.
For example: so many traders determine their cut-loss level 2% of
their capital and they call it 2% rule. If you own 1000 shares of X
at $100 with a $2 stop loss order in place, your risk is: $2 * 1000
= $2,000. So long as you have capital amounting to at least
$100,000 on hand, you would not be considered to be in breach
of this "rule".
5.3 Portfolio Risk Management
While managing the risk of each trade your portfolio risk will be
well under control and you manage your portfolio risk actively,
but to control your portfolio risk management better notice to

32
this pointes:
1- Determine your overall cut-loss level. Usually your portfolio
should not lose more than 10% of your capital.
2- Diversify your investment in at least six or more different
stocks.
3- Know your overall risk tolerance before building up the
portfolio.
4- Act quickly when you see your risk limits exceeded.
5- Close out the entire portfolio if it loses to your overall stop-loss
level.

33
6. Risk Management Engines of
Stock Exchange for Equity Market
An effective risk management technique is very essential for
efficient and smooth functioning of stock market. Risk
containment measures are therefore implemented from all
possible sides or levels, i.e at trading level, traders’ level and
investors’ level.
6.1 At Trading level
 Segregation of trading and settlement from each other
 Market surveillance
 Circuit Filters/Breakers
 Price Band
 Settlement through dematerialized securities
 Settlement/Trade Guarantee Fund (SGF/TGF) to guarantee
settlement of transactions
 Defaults Committee
 Plan for business continuity and site for disaster
management
6.2 Trader’s level
 Base Minimum Capital (BMC) and Additional Capital
Deposit with Stock Exchange or Clearing Corporation.
 Time to time deposits of various margins with Stock
Exchange

34
6.3 At Investor’s level
 Compliance of KYC Norms by the investors
 Investor Protection Fund to compensate legitimate claims of
investors against a defaulter stock-broker
 Investor Service Centre
 Investor Grievance Committee

35
7. Investors to Take Care of Risk
in Trade.
A. Contract note:
A contract note is something which imposes a legal relationship
between the client and trading member with respect to
purchase/sale of securities and settlement of trades. It is an
important document for investors which keeps the legal record of
client’s transaction carried on a stock exchange through a
broker. After verifying the details contained in contract note, the
client keeps one copy and returns the second copy to the trading
member duly acknowledged by him. Only broker can issue
contract notes. A broker is supposed to send the contract note to
its client within 24 hours.
A contract note contains following important details:
 Name, address and SEBI Registration number of the
Member broker.
 Name of partner /proprietor /Authorized Signatory.
 Dealing Office Address/Tel No/Fax no, Code number of the
member given by the Exchange.
 Unique Identification Number
 Contract number, date of issue of contract note, settlement
number and time period for settlement.
 Constituent (Client) name/Code Number.
 Order number and order time corresponding to the trades.

36
 Trade number and Trade time.
 Quantity and Kind of Security brought/sold by the client.
 Brokerage and Purchase /Sale rate are given separately.
 Service tax rates and any other charges levied by the broker.
 Securities Transaction Tax (STT) as applicable.
 Appropriate stamps have to be affixed on the original
contract note or it is mentioned that the consolidated stamp
duty is paid.
 Signature of the Stock broker/Authorized Signatory.
Why receipt of contract note from the broker in respect of
buying or selling of shares, is very essential.
 It will help an investor to lodge complaint against his broker
in case his claim is not received.
 It will also help an investor in getting his legitimate claims
against a defaulter stock broker.
 Contract Note is a confirmation of trades done on a
particular day by a trading member on behalf of its client.
 A contract note not only records transactions but it also
provides the details of the transaction in writing.
 The contract note contains details that enable the investor
to spot a particular transaction among the thousands of
transactions taking place on the stock exchange and further
cross-check the trade information with that provided by the
stock exchange.
 Investor should always check the contents of the contract
note and seek clarifications from brokers for discrepancies.

37
 Contract notes tell investors /clients what they have
transacted into. There are instances where companies with
similar names trade on bourses or multiple instruments
issued by one company trade on exchange.
 Bad communication between investor / client and the
broker at the time of trading may result in wrong securities
bought or sold.
 Contract note helps arbitrators for settlement of disputes if
any arising out of transactions.
 By going through the contract note investors get to know
what they have bought or sold. The contract note can be
used to check the demat holdings and ascertain the exact
brokerage paid.
 Contract notes are also useful to ascertain the capital gains
tax payable.
B. Other Responsibilities:
 May or may not execute Power of Attorney (PoA) in favour
of stock broker as this is not mandatory for opening a
trading account or for dealing in shares and securities.
 Ensure PoA is not mis-utilized if it is given in favour of
the stock broker
 Make payment, if any, to the broker only through cheque
 Ensure receiving SMS/ e-mail alerts from the stock
exchange in respect of buying or selling of shares, if any.

38
 Ensure receiving SMS/ e-mail alerts from the
Depositories in respect of credit or debit to the Demat
A/c. consequent to buying or selling of shares, if any
 Check the holding status in Demat A/c. regularly.
 Ensure settlement of your claim by the stock broker in
time in respect of buying or selling of shares, if any.
 Don’t engage in excess day trading and try to become a
long term investor in right stocks.
 Don’t be panic while buying or selling shares and try to
select good stocks for investment.
 Be careful in investing in high volatile market.

39
8. Usage of Risk management Weapons
A. On rolling basis-
It is imperative that a proper risk management service is in place
to prevent untoward losses for both the Clients as well as the
Broking entity
 Role of surveillance department-
Scrip-wise Surveillance is done through online surveillance,
offline surveillance and Client-wise Surveillance. In Online
Surveillance the surveillance team watches the online trades as
they are executed, and extra ordinary volume in the particular
scrip or client is immediately investigated by calling up the sub
broker / branch and asking for details of clients and as per the
details made available, the clients previous purchase or sales
transactions are looked into, by viewing the ledgers.
 Monitoring exposure limit and outstanding position of
brokers-
The stock market in India have undergone into tremendous
changes and one of the important change which has instilled
greater confidence among investor in India and abroad is
reduction of settlement period to one day and introduction of
Depository System to eliminate the risk of bad paper. These
changes have reduced the risk of default on broker. The Front
End trading software has a sophisticated system of setting limits
based on exposure, number of trades, value of trades, scrips
allowed to trade in, quantity per order, etc. Scrips can be
excluded from trading if they are on ban list or upon the
discretion of the Management based on risk perception.

40
 Applicability of various margins
Online surveillance is carried out to see whether mark to market
loss of client is crossing a set limit or if it is exceeding the credit
balance in our account. In such cases, additional margins are
called for from the clients or clients are advised to reduce the
exposure. While allowing trades in Odd lot and Z category shares,
necessary permissions are obtained by Risk Management
Department/Compliance Officer to avert the possibility of
synchronized / circular trading. The client’s trading track record
regard to his financial capability and dealing in such scrip is
looked into.
B. As and when required
 Checking of high degree volatility /price
fluctuations
Volatility as a phenomenon as well as a concept remains
central to modern financial markets and academic research.
The link between volatility and risk has been to some extent
exclusive, but stock market volatility is not necessarily a bad
thing. In fact, fundamentally justified volatility can form the
basis for efficient price discovery and it act as a risk
management weapons.
 Applicability of circuit filter/breakers
There may be market wide circuit breakers, as may be decided
by the Relevant Authority from time to time. There may be
circuit filters specific to securities, as may be decided by
Relevant Authority from time to time. Market wide circuit
breakers or security specific circuit breakers shall cause
temporary or permanent trading halts for market as a whole or
specific to a security, as the case may be, and as may be
decided by the Relevant Authority from time to time to act as a
weapon for risk management when required.

41
 Applicability of price brand
There may be daily/intra-day/weekly price bands, as the case
may be, for all the securities, as may be provided in the relevant
Regulations from time to time, except in respect of securities in
which trading in its derivative instruments is permitted and the
securities included in the indices on which derivative products
are available for trading, unless specifically decided otherwise by
the Relevant Authority. These price bands may be made
uniformly applicable and implemented at all the stock exchanges.
 Prevention of insider trading
Under prevention of insider trading of securities the company is
committed to the preventing the confidentiality and preventing
the misuse of any unpublished price sensitive information.
Insider trading means when insider uses unpublished price
sensitive information to arrive at securities trading. Insider
means any person who is a connected person and who is
reasonable, expected to have access to unpublished price
sensitive information in respect of securities of the company.
C. In case of default
 Guarantee to settlement
SEBI has from time to time put in place various risk containment measures to
address the risks involved in the securities market. One such measure prescribed
was norms for Settlement Guarantee Fund (SGF)at stockexchanges including
corpus, contribution, management, usage and recoupment of the fund corpus.
The new norms would further strengthen the system to deal with settlement
defaults, although there have been very few such cases in recent times, as
settlement commitments have mostly been meet even in times of freak trades
and temporary outages on stockexchange platforms. To safeguard markets from
systemic risks, regulator SEBI today put in place a new layer of safety net in
form of 'coresettlement guarantee fund' to mitigate risks from possible default
in institutional trades. The new system would enhance the robustness ofthe

42
present risk management system of the clearing corporations to enable them to
deal with defaults of the clearing members much more effectively. This new
core fund would be created within the existing Settlement Guarantee Fund
(SGF), against which no exposure is given and which is readily and
unconditionally available to meet settlement obligations of clearing corporation
in case of clearing members failing to honor settlement obligation.
 Subsequent action of stock exchange
In a subsequent action, the new shares are usually issued from
the company’s treasury and the net offering proceeds go to the
company. Since the subsequent offering increases the
company’s shares outstanding, it has a dilutive effect i.e. it
dilutes the stakes of existing share holders.
 Committee to deal with default
The defaulter committee is statutory committees of the stock
exchange setup to administrator the assets in respect of the
defaulter members vesting in the stock exchange. The
defaulter’s committee distributes the amount available in the
defaulter’s account to the admitted claims on pro-rata basis as
per the priority laid out under its rules.
 Compensation for legitimate claims of clients of
defaulter
Legitimate claims and rights of the purchaser in case of default
delivery remain unaffected. The purchaser is able to sell all the
conditional stock and assets of normal business activities.

43
9. CASE STUDY
During the late nineteen eighties, the share mania spread so
rapidly that many new Stock Exchanges came into existence.
There was a hectic boom in the primary market activities with a
number of existing and new companies floating issues. The
number of companies getting listed on the exchange increased
steadily. Investments and trading picked up such a speed that it
gave birth to some of major scams in the secondary market
during 1990s.
Analysis of such scams sometimes becomes necessary to
understand what were the loopholes present in the system
earlier, how did market respond, what market regulators did to
overcome those loopholes and last but not the least to check how
present risk containment measures adopted by our stock
exchanges can possibly avoid any further scams and any
exceptional market scenarios to ensure safety & integrity of entire
financial system.

44
CASELET 1: Harshad Mehtas Scam
In the year 1992, the rise in BSE Sensex raised many questions.
The man behind all this was Harshad Mehta.
Who was Harshad Mehta ?
Harshad Shantilal Mehta was a high-profile Indian stock broker
who grabbed the headlines for making Bombay Stock Exchange,
one of the victims of biggest security scam till ever. He was
accused of massive stock manipulation by the help of worthless
bank receipts. In reality he actually exposed the loopholes in the
Bombay Stock Exchange (BSE) transaction system, Indian
Banking System and SEBI, which further introduced new rules to
overcome those loopholes. Mehta was convicted by the Bombay
High Court and Supreme Court of India for financial scandal
valued Rs 4,999 crore , which took place on the Bombay Stock
Exchange (BSE). He was tried for 9 years, until he died in the late
2001.
Early life and Career:
Mehta was born on 29 July, 1954 in a lower middle-class
Gujarati Jain family & had spent his early childhood in Mumbai
where his father was a small businessman. After doctors advice
to Mehta’s father to shift to a drier place on account of his health,
the family relocated to Raipur in Chhattisgarh. Mehta studied
from Holy Cross Higher Secondary School, Byron Bazar, and
Raipur. By profession, Mehta was Graduate in commerce.

45
His journey from a stock broker to big market bull
During 1980s, for a period of 10 years, Mehta worked at the
position of increasing responsibilities in several brokerage firms.
He left his job at The New India Assurance Company in 1980 and
got new one with BSE-affiliated stockbroker P. Ambalal. In 1981,
Mehta became a sub-broker for stockbrokers J.L. Shah and
Nandalal Sheth. After gaining considerable experience as a sub-
broker, he started a new venture called Grow More Research and
Asset Management Company Limited with his brother Sudhir.
When the BSE auctioned a broker’s card, the Mehta’s company
bid for it with the financial support of J.L. Shah and Nandalal
Sheth. By year 1990, Mehta had become a prominent name in
the Indian stock market. He started buying shares heavily,
especially the shares of India's foremost cement manufacturer,
Associated Cement Company (ACC). Due to heavy trading in
ACC, price of the cement company rose from 200 to 9000
(approx.) implying a 4400% increase in its price. It was later
revealed that Mehta used the replacement cost theory to justify
the reasons for price rise. Replacement cost theory, basically
states that the older companies should be valued on the basis of
the amount of money that would be needed to create another
similar company and by help of this theory he stated that stock
had been undervalued and the market had simply corrected it
when it revalued the company again by taking this theory into
account. By the latter half of 1991, Mehta earned a nick name of
‘Big Bull’ as people credited him for having initiated the Bull Run
in stock market.

46
The making of 1992 security scam:
Indian banking system was not very strong at that time, that’s
why he was able to misuse the system. Mehta and his associates
took the advantages of loopholes and diverted the funds involved
in interbank transactions into the stock market between April
1991 to May 1992. They were buying shares heavily across many
industries at premium. Indian Stock Exchange Index (Sensex),
which was hovering around the 800 mark in early 1990, flared
up past 3500 by April 1992.
The exposure of 1992 security scam and its outcome:
Harshad Mehta scam’s was exposed on April 23, 1992, when
veteran columnist Sucheta Dalal wrote an article in The Times of
India. Dalal’s column read: “The crucial mechanism through which
the scam was affected was the ready forward (RF) deal. The RF
is a secured short-term (typically 15-day) loan from one bank to
another. Crudely put, the bank lends against government
securities just as a pawnbroker lends against jewel lers. The
borrowing bank actually sells the securities to the lending bank
and buys them back at the end of the period of the loan, typically
at a slightly higher price. It was this ready forward deal that
Mehta and his associates used with great success to channel
money from the banking system.”
In a ready-forward deal, a broker usually brings two banks
together and earns a commission for this. Although the broker
does not handle the cash or the securities, this was not the case
in the prelude to the Mehta scam. Mehta and his associates used

47
this RF deal with great success for channelizing money through
banks.
The securities and payments were delivered through the broker
in the settlement process. The role of the broker was to function
as intermediary. A broker received the securities from the seller
and money in form of cheque from the buyer. He handed over
those securities to the buyer and subsequently made the
payment to the seller. However such a settlement process meant
that, both the buyer and the seller may not even know each other
from whom they have traded with and only the broker would
know both the parties. The brokers could manage this method
expertly as they had already become market makers by then and
had started trading on their account.
Another instrument used by Mehta and his associates in this
scam was the Bank Receipt (BR). A BR is a receipt for the
money received by the selling bank and pledges to deliver the
securities to the buyer. A BR thus confirmed the sale of
securities. In this scam, no securities were being traded in reality
but the seller gave the buyer a BR.
Ready with such dangerous game plan, Mehta started searching
for banks which would readily issue fake BRs. His search ended
when he found that the, two small and little known lenders, Bank
of Karad (BOK), Mumbai and the Metropolitan Co-operative Bank
(MCB), were willing to do such things in return for a fee. These
two banks agreed to issue BRs as and when required. Once they
issued the fake BRs, Mehta passed them on to other banks who
in turn lent him money under false assumption that they were
lending money against government securities. Now this money

48
was used by Mehta and his associates for buying shares in stock
market and driving up the prices of stock by buying them at low
prices. When the time for returning money to the bank came, the
shares were sold for significant profits and the BRs were retired
and banks also got their money back.
Outcome: There were serious consequences of this scam.
When the scam was exposed, it caused many problems in the
capital market and money market. Upon the exposure of the
scam several banks found that they were holding BR of no value
at all, as they all were fake. Banks started demanding their
money back, which caused Sensex to fall almost dramatically the
way it had raised. However by this time the whole banking
system had already suffered a loss of Rs 4,000 crore. The scam
was taken in the Indian Parliament, leading to Mehta's
imprisonment. The scam’s exposure led to the death of the
Chairman of the Vijaya Bank who reportedly committed suicide
by jumping from his office roof. He was guilty of having issued
checks to Mehta and knew accusations and shame he would
have to face from the public.
Mehta was charged with 72 criminal offences, out of which he
was convicted for only one. On 9 November 1992, CBI arrested
Mehta and his associates, for allegedly misappropriating more
than 2.8 million shares (2.8 million) of about 90 companies,
including ACC and Hindalco and later banned from the stock
market with investigators holding them responsible for causing a
loss to various entities. However, in September 1999, Bombay
High Court convicted and sentenced him to five years rigorous

49
imprisonment and a fine of Rs. 25000. On 14 January 2003,
Supreme Court of India confirmed High Court's judgment. He
died of heart ailment, at the age of 47, on 31st December 2001.
Nine years after the death of Harshad Mehta, the IT department
and public sector banks (PSBs) have successfully recovered a
significant portion of their claims. The Supreme Court directed
the Custodian to liquidate the assets of the Harshad Mehta
Group (HMG) in March 2011 to make payments of Rs1,995.66
crore to the IT department and Rs 199.25 crore to the State Bank
of India (SBI), making the two institutions two of the earliest
claimants to recover their dues.
While the SBI’s total principal amount claim of Rs 1,000 crore
have been largely settled, financial institutions have also received
some money. However, Standard Chartered Bank, which had
claim of Rs 500 crore, has yet to recover its dues. Although the
total claim over the HMG is of more than Rs 20,000 crore, the
Supreme Court has said that for the present, it would only
consider claims towards the principal amount.
Measures taken post scam:
 Post Mehta scam, Government of India, passed “SEBI Act
1992” and conferred statutory powers to it.
 Suspended brokers who were directors and other officials of
BSE for alleged insider trading.
 Imposed additional volatile 10% margin on Group ‘A’ shares.
 Imposed margin on net outstanding selling position of FIIs,
financial institution, bankers and mutual funds.
 Rolling settlement system was made compulsory.

50
 Launched trade guarantee fund to guarantee settlement of
all transactions.
 Reduced gross exposure limit for brokers on base minimum
capital to 10 times in NSE and 15 times for other stock
exchange.
QUESTION FOR DISCUSSION
1) Analyze this case first and its impact.
CASELET 2:- Ketan Parekh’s Scam- A BIG
HIT TO SMALL INVESTORS
“I have left with zero saving. I don’t know how to feed my
family.”
This was the sentence used by small innocent investors during
this scam. Many people were left with zero saving, as their money
had no value. Some suicide cases were also reported during this
time. But what happened in this scam? …………..
A Crash that became “Talk of Nation”:
On March 1, 2001 the Bombay Stock Exchange Sensitive Index
(Sensex) fell by 176 points which shocked the government, stock
market and the Indian investors because just one day before the
Finance Minister, Mr. Jaswant Sinha had issued budget in the
parliament which had prompted a 177 point rise in the Sensex.
This sudden crash in the stock market prompted the Securities &
Exchange Board of India (SEBI) to start immediate investigations
for checking sudden high volatility of stock market. Reserve Bank

51
of India (RBI) also ordered some banks to furnish data related to
their capital market exposure. Media reports revealed that private
sector banks have exceeded their prudential norms of capital
exposure, thereby contributing to the stock market volatility.
The man behind this scam was Ketan Parekh [KP]. The Sensex
crashed further by 147.18 points after the arrest of Ketan Parekh
by the Central Bureau of Investigation (CBI) on 30 March, 2001.
Ketan Parekh was a chartered accountant by profession and used
to manage his small family business NH securities started by his
father. He was a trainee of Harshad Mehta and also known as
“Bombay Bull” having connections with movie stars, politicians
and leading international entrepreneurs. Over the years, KP had
built a network of companies, involved in stock market
operations, mainly in Mumbai.
The birth of scam
The stocks of Information, Communications, and Entertainment
sector were rising all over the world in early 1999 which led to a
rise of the Indian stock markets as well.
KP invested in the stocks of Amitabh Bachchan Corporation
Limited (ABCL), Mukta Arts, Tips and Pritish Nandy
Communications. He also had stakes in HFCL, Global
Telesystems (Global), Zee Telefilms, Crest Communications, and
PentaMedia Graphics. According to media reports, KP took
advantage of low liquidity in these stocks, which eventually came
to be known as the 'K-10' stocks. These shares were held through
KP's company. From January to July 1999, the K-10 stocks went
on rising. HFCL and Global were major gainers. He started

52
trading of these shares within the network of his own companies
with the intention of creating buying pressure for shares of K-10.
Continuous trading by Ketan Parekh made other brokers in the
market to suspect that something is happening inside K-
10. Thus brokers started buying shares of K-10 for themselves
and also urged their clients to buy these shares.
Mutual funds like Alliance Capital, ICICI Prudential Fund and
UTI also invested in K-10 stocks, and saw their net asset value
soaring. By January 2000, K-10 stocks regularly featured in the
top five traded stocks in the exchanges. HFCL's traded volumes
went up from 80,000 to 1,047,000 shares. Global's total traded
value in the Sensex was Rs 51.8 billion.
KP had formed a network of brokers from smaller exchanges
such as the Allahabad Stock Exchange and the Calcutta Stock
Exchange. He used to buy shares in the fictitious names of poor
people living in Mumbai, though KP was a successful broker, he
did not have the money to large purchase. According to a report,
12 lakh shares of Global would have cost KP around Rs 200
million and Aftek Infosys would have cost him Rs 50 million,
while the Zee and HFCL stakes would have cost Rs 250 million
each. Analysts claimed that KP borrowed funds from various
companies and banks. He bought shares when their prices were
low and continuously saw the prices going up in the bull market
because of continuous trading. When the prices were high
enough, he pledged the shares with banks as collateral for funds
and carry on this process.
A small Ahmedabad-based bank, Madhavapura Mercantile
Cooperative Bank (MMCB) was trapped in KP’s game. MMCB

53
issued funds to KP without proper collateral security and even
crossed its capital market exposure limits. Parekh and his
associates secured Rs 1,000 crore as loan from the Madhavpura
Mercantile Co-operative Bank despite RBI regulations that the
maximum amount a broker could get as a loan was Rs15 crore.
Hence, it was clear that KP’s motive was to inflate shares of
selected companies in collusion with their promoters.
Lady luck disfavours Parekh:
Just a day after the presentation of the Union Budget in
February 2001, Parekh appeared to have run out of luck. It’s
interesting to know how this happened. KP's strategy of raising
loans by offering shares as collateral security to the banks
worked well in accordance with the continuous rise in share
price, but it changed just the other way round, when the markets
started declining in March 2000. Due to fall in the NASDAQ, K-
10 stocks also started declining. KP was asked to either keep
more shares as collateral or return some of the borrowed money
to banks. In either case, it put financial pressure on him. In the
next two months, when the Sensex fell by 23% and the NASDAQ
by 36%, K-10 stocks saw fell hugely by 67%. However, with
improvements in the global technology the K-10 stocks began
moving up once again in May 2000. In December 2000, the
NASDAQ crashed again and this time technology stocks were top
losers. Such uncertainty created doubts regarding the future of
technology stocks causing prices to fall across the globe. This
created panic among many investors / traders / mutual funds /
brokers. A team of traders, Shankar Sharma, Anand Rathi and

54
Nirmal Bang, known as the “bear cartel” subsequently placed sell
orders on K-10 stocks, and crushed their inflated prices. KP
began to have liquidity problems and payment crisis.
The payment crisis at Calcutta Stock Exchange (CSE) came as
one of the biggest setbacks for KP. KP had network of brokers at
CSE who used to buy shares at KP's behest. By February 2001,
the scrips held by KP's brokers at CSE were reduced to half from
their initial worth of Rs 12 billion. The situation worsened as KP's
payments of Rs 5-6 billion were not honored on time for the
settlement and about 70 CSE brokers, including the top three
brokers of the CSE (Dinesh Singhania, Sanjay Khemani and
Ashok Podar) became defaulter on their payments. By mid-
March, the value of stocks held by CSE brokers further became
half. The CSE brokers started pressurizing KP for payments. KP
again turned to MMCB to get loans. But the outflow of funds
from MMCB had already crossed the limits from January 2001.
Now the all the borrowings of KP put together also could not
rescue him.
The Exposure of scam and outcome:
Ketan Parekh's fraudulent practices were first exposed by veteran
columnist Sucheta Dalal. Sucheta's column read, “It was yet
another black Friday for the capital market. The BSE sensitive
index crashed another 147 points and the Central Bureau of
Investigation (CBI) finally ended Ketan Parekh’s two-year
dominance of the market by arresting him in connection with the
Bank of India (BoI) complaint. Many people in the market are not
surprised with Parekh’s downfall because his speculative

55
operations were too large, he was keeping dubious company, and
he was dealing in too many shady scrips.”
Who were major victims?
Public, Buyers of shares of companies, UTI, MMCB, Bank of
India, State Bank of India, Global Trust Bank, Calcutta Stock
Exchange were major victims of this scam. When the prices of
selected shares started constantly rising, innocent investors were
buying such shares believing that the market was genuine. Soon
after the scam was exposed, the prices of these stocks came
down to the fraction of the values at which they had been bought.
When the scam was fully burst, the rigged shares lost their
values so heavily that few people lost their life time savings.
Consequences: The Global Trust Bank and the Madhavpura
Cooperative Bank became bankrupt. MMCB was liquidated.
Some banks including Bank of India lost significant amounts of
money. The small investors felt that all parties in the functioning
of the market were responsible for the scams. They opined that
the broker-banker-promoter nexus was the main reason for the
scams in the Indian stock markets.
Parekh was held on charges of draining out Rs 1,370 million from
Bank of India (BOI) through pay orders issued by Madhavpura
Mercantile Co-operative Bank in Ahmedabad, Gujarat The CBI
registered a case against Parekh after BOI filed a complaint
Parekh had defrauded it. Preakh was convicted in 2008 and he is
banned from trading till 2017. KP still owes Rs 400 crore to its
stockholder.

56
SEBI actions to control damages:
Some of the steps taken by SEBI post scam were :-
The trading cycle was cut short from a week to a day.
A historical decision to ban carry-forward system in stock trading
called ‘BADLA’ was taken, effectively from July 2001.
SEBI introduced forward trading in the form of exchange-traded
derivatives to ensure a well-regulated futures market.
Withdrew broker control over stock exchanges.
SEBI also banned trading by all stock exchange presidents, vice-
presidents and treasurers.
QUESTIONS FOR DISCUSSION
1. Identify the loopholes in the entire financial system which
set platform for KP to plan such scam.
2. Do you think steps initiated by SEBI were right? What else
SEBI could have done.
3. Considering present risk management measures that are
available now, comment on how this scam could have been
prevented by taking each measure into account.
CASELET 3: A ‘parallel’ crisis in Calcutta
Stock Exchange-Settlement Guarantee Fund
to rescue.
In March 2001, Calcutta Stock Exchange (CSE) was trapped in
Country’s worst ever payment crisis, making for CSE difficult to
survive, when its 10 brokers were defaulted in their payment for

57
the amount of Rs 120 crore in three consecutive weekly
settlements. Crisis was a consequence of scam by Ketan Parekh.
The CSE officials had to use Settlement Guarantee Fund (SGF)
which decreased the SGF at CSE by Rs 48 crores and depleted
the general reserves to the extent of Rs.20 crore. Three elected
broker members - Dinesh Kumar Singhania, a director on the
CSE board, Harish Biyani and Ashok Kumar Poddar were made
to resign. Till February-end CSE had average daily turnover of
Rs.1,500 crores, but the volume shrink to less than Rs.100
crores in the second half of March. The total loss was for Rs. 800
for all the parties and more than 70 % of brokers especially small
and medium brokers lost their life time savings. Abhisekh Banka,
a 22 years old sub-broker was reported to commit suicide by
drowning. His wife killed herself by jumping off a multi-storied
building.
The crisis at CSE originated due to Ketan Parekh’s scam in the
same year. The Mumbai-based bull trader Ketan Parekh had
connections with chain of brokers at several small stock
exchanges including Calcutta Stock Exchange mainly, which
used to buy shares on Parekh’s behest for his official and
unofficial deals in the ICE (information, communication and
entertainment) shares. The fall in the technology stocks, made it
difficult for Ketan Parekh to fulfill his payment obligations, as a
result, the whole gang of brokers also got engulfed in payment
crisis in parallel and became big defaulters to the exchange.
According to Tapas Dutta, executive director of CSE, there was a
shortfall of Rs 32crore in settlement no.148, which was for the

58
first time, a very huge default at any major exchange of the
country. Defaults were mainly in the HCFL scrip and the DSQ
software scrip. According to CSE officials, the pay-in shortfall
was a rare phenomenon and even if there was a shortfall, it was
never more than few lakhs and such shortfalls were recovered
from margin deposits –a kind of advance payment or collateral
against outstanding position, of defaulted brokers.
CSE attempted to bridge the gap by encashing the bank
guarantee and fixed deposits of default brokers kept with the
exchange as margin, which were around Rs.70 crore. It even sold
the shares bought by the brokers, but could not fulfill the gap.
After utilizing these funds and Settlement Guarantee Fund on
March 15, there was still a shortfall of Rs 13.08 crore for the
settlement no.149. On March 22, 40 more brokers became
unable to fulfill their commitment towards the settlement no.150
as they all were hit by chain reaction of earlier defaults of
Singhania, Biyani and Poddar. CSE officials used the same
method as in earlier two settlements and bridged the gap of
shortfall.
On March 26, the CSE formally declared 10 brokerages owned by
Singhania, Biyani and Poddar as defaulters.
The CSE authorities were blamed for not being able to prevent
the crisis and "allowing it to blow out of proportion". One broker
blamed the lack of regulations and surveillance on the bourse
allowed a highly illegal and volatile BADLA business. Ajit Dey,
former president of the CSE said: "It is obvious that the CSE
authorities did not anticipate that things will take such a turn."

59
The majority of the brokers demanded the resignation of the
elected directors of the CSE. On March 30, the eight elected
members - president Kamal Parekh, vice-president K.K. Daga and
six directors resigned., A new management sub-committee
comprising of six public representatives, three SEBI nominees
and the executive director was formed by the governing
committee on April 2, who decided first to replenish the depleted
SGF. If not replenished according to SEBI guidelines, it would be
end of CSE. The main concern of the management now was to
restore the CSE's financial position to establish CSE as
demutualised entity by separating the ownership and
management. However, Ajit Day was afraid believing dark future
of the CSE as the payment crisis had created confusion in the
market and a drop in business.
1) Analyze the importance of Settlement Guarantee Fund.
2) Should the pay-in/pay-out to client be done through the
broker /TM or directly through Professional Clearing
member (PCM) or should it be made mandatory for all TMs
to tie-up with designated PCM for providing this service to
their clients?

60
CASELET 4: North Star Gems (India)
Limited- Market manipulation and price
rigging
The abnormal rise in price and volume in the scrip of North Star
Gems (India) Limited, just after its public issue prompted SEBI to
conduct an investigation which revealed that a group of persons
with the help of its associate entities operated in the scrip with a
view to manipulate the prices. This group of persons in collusion
with the promoters of the company cornered the shares offered in
the public issue and through secondary market purchases. The
buying pressure created a false market in the scrip and some of
the investors were induced to sell short at the higher level of
prices. This resulted in auction and closeout at abnormally high
prices. On completion of investigations, the SEBI ensured that
the manipulators in any case, would not receive ill-gotten gains
arising out of such market manipulations and hence directed
amount of Rs. 1.75 to be transferred to the Investor Protection
Fund of the concerned stock exchange. Enquiry proceedings were
initiated against the stock brokers involved in the case and
against the registrar to the Issue. Show cause notices were
issued to the non-intermediaries including the promoters of the
company.

61
CASELET 5: Maruti Organics Ltd- Not
compliance with KYC norms & Margin
Requirements
In June, 1996, NSE alleged that there was an attempt to defraud
the clearing corporation of NSE by some brokerage firms who
were trading in the scrip of Maruti Organics Ltd (MOL).
Investigations revealed that the brokers at whose terminal buying
position were created were not acting diligently and enrolled
clients without making any meaningful enquiries and failed to
verify details like, bank a/c or address etc. of the their clients.
The buying position was built up across the country i.e. at
Ahmedabad, Bangalore, Mumbai, Hyderabad, Chennai, etc.
Clients dealt with the broker and when the time for pay in had
come, they escaped without paying brokers for the purchase
made by them. As Settlement Guarantee Fund of NCCL
guarantees settlement/payment for each trade entered at the
Exchange, in the event of failure of the buyer to pay, NCCL would
have to pay the sellers. NSE, from its investigations, held that
these transactions in MOL were collusive trades and ordered
dismissal of the same. Brokers were accused of not taking
enough precaution by allowing unknown clients, to build up
huge buying position in scrip which was volatile and illiquid
without collecting sufficient margins from them and which was
beyond their financial capacity and also for their carelessness
which put the settlement system of the Exchange at risk. On
these facts, violation of SEBI (Stock Broker & Sub-Broker)

62
Regulations, 1992, enquiry proceedings were initiated against the
broker.
CASELET 6: Market Surveillance-
Handling exceptional market conditions
During 1996-97, stock market witnessed several periods of
volatility and turbulence. For example, the BSE Sensex decreased
sharply by 5.45 per cent and 6.52 per cent on January 16, 1997
and March 31, 1997 respectively. On January 16, 1997, intra-
day volatility of 357 points was witnessed at the Stock Exchange,
Mumbai. However the market remained safe during these periods
of volatility because of the risk containment measures that were
in place.
During 1997-98 also, the market witnessed certain periods of
volatility. Due to large currency depreciation in Asian economy,
since July 1997, countries like Thailand, Malaysia, Philippines,
Indonesia as well as South Korea were severely affected. The fall
out on Indian securities markets exhibited unusual price
volatility on some occasions during this period when the BSE
Sensex fell by more than 3 per cent to 7 per cent against an
annual average intra-day price volatility of around 1.9 per cent.
On August 20, 1997 the intra-day price volatility of the Sensex
was exceptionally high at 3.4 per cent. On October 28, 1997, The
Stock Exchange, Mumbai was closed due to festive holidays.
However, the National Stock Exchange of India Ltd, (NSEIL)
remained open and the Nifty fell by 7.9 per cent on a single day.
The relatively steep decline on this day was affected by events in

63
other developed markets specially the decline in equity prices in
Hong Kong. Equity prices in the United States, Japan and
Europe fell on October 27, 1997, causing Dow Jones Industrial
Average of U.S stocks to decline by 7.1 per cent on the same day.
This fall in the Dow affected sentiments in the Asian markets
when they opened on October 28, 1997. Indian market took cue.
On this day, the scrip specific price bands were imposed on 294
securities out of 1350 securities which were traded on the NSEIL.
Apart from the strict monitoring of market movements and
positions of brokers which is now being done automatically in the
stock exchanges, the SEBI took pro-active action after discussing
with the stock exchanges to arrest the fall. The NSEIL reduced
the daily price band from the standard 10 per cent level to 7 per
cent level. This measure along with exposure limits helped in
stabilizing the market. On January 15, 1998, the Indian
securities markets again witnessed high level of activity and the
intra-day price volatility of the BSE Sensex was close to 3 per
cent. On the following day, the market improved reversing the
previous day’s trend. Also there was not a single default or failure
in the market and market remained stable.
Other regulatory measures taken by the SEBI and the stock
exchanges to stabilize the markets during the period of
exceptional market volatility have been stringent administration
of mark to market margining system and adherence to prudential
exposure norms. In Indian securities markets, securities specific
circuit breakers and price bands are followed. Experience has
shown that scrip related circuit breakers and price bands were
more appropriate when compared to index related circuit

64
breakers. It ensured that the market remained open and only
those counters where volatile scrip which touched the lower of
the daily band of 10 per cent or weekly band of 25 per cent, were
closed. On account of such measures the panic that had set in all
over the world could not aggravate the market conditions in
India. In fact the situation was well under control.
1) Discuss various risk containment measures that have
been used in above cases.
2) Discuss the role of market surveillance in case of
volatility.
3) Why security specific circuit breaker or price band is
more appropriate.

65
10. FINDINGS
A. Analysis of Harshad Mehta’s Scam
Market capitalization of listed companies in
BSE
Year
BSE (Market Turnover)
Amount in Rs crore
AllIndia Market
Capitalisation (Rs crore)
1990-91 36012 110273
1991-92 71777 354106
1992-93 45696 228780
1993-94 84526 400077
As per the data ,we can see that the BSE Market turnover had
declined from Rs.71777 crores in the year 1991-92 to Rs.45696
crore in the year 1992-93. Simultaneously there was an impact
on the Market capitalisation of the economy during the same
year.
Difference before and after scam
EFFECTS Before & During Scam After Scam
Effect on Market
(Sensex)
Around 4500 points Fell to 2500 points.
Market
Capitalization
Fell by Rs 100,000
crore

66
Investors wealth
Continuous Rise in share
price leading to rise in
investors wealth also
Shares became
“Tainted’
Share price Prices of share were
soaring.
Drop in share price by
40%
Liquidity in
stock market
Greater Liquidity was
imparted to stock market
during the scam
Liquidity decreased as
investors were afraid
of investments after
such scams.
Brokers role/
outstanding
position
Brokers got involved in
inter-banking transactions
just like stock market
operations. They took
positions in market.
Control over brokers
was implemented.
Clearing and
Settlement
system
Brokers started playing role
in settlement process &
managed to get cheques in
their account.
Clearing corporation
was set across
exchanges and
Clearing House of
stock exchanges took
the responsibility of
settlement guarantee.
Settlement
Period
Settlement Cycle was a
period of 15 days.
Settlement period was
shortened to 1 week
Money
Laundering
The scam is one of the
cases of money laundering.
“The Prevention of
Money Laundering
Act” was passed in
2002
Loss Rs.4000 Crore to
banking sector and
overall loss of Rs.
5000 crore .
Before the scam, the Sensex was hovering around 4500 which fell
to 2500 points in April 1992 on exposure of scam. The market
capitalization fell by Rs 100,000 crores. Let’s go through the
performance of stock market just before this scam.

67
 1000 points, 25 July 1990- On 25 July 1990, the SENSEX closed
at 1,001 which was a four-digit number on the account of a good
monsoon and excellent corporate results.
 2000 points, 15 January 1992- On 15 January 1992, the
SENSEX crossed the 2,000 mark and closed at 2,020 after the
liberal economic policy initiatives undertaken by the then finance
minister and Prime Minister of India Dr Manmohan Singh.
 3000 points, 29 February 1992 - On 29 February 1992, the
SENSEX crossed 3,000 marks on the account of market-friendly
budget announced by Manmohan Singh.
 4000 points, 30 March 1992- On 30 March 1992, the SENSEX
crossed the 4,000 mark and closed at 4,091 on the expectations
of a liberal export-import policy.
Investors who had bought shares through brokers who
accused in this scam, suffered huge loss as their shares
were declared “tainted “ shares. “Tainted” shares means,
shares which do not have value, they are just piece of share
and cannot be delivered in market. Share price of most of
the stocks fell by 40%. Clearing and settlement process was
done through brokers. A lot of brokers were involved.
Generally government securities were traded directly

68
between the two transacting banks, and brokers role was to
bring the two banks together. Brokers should not have
handled cash or securities. But here brokers took active
position just like operations in stock market. Brokers
managed to get cheques in their account. This opened the
way of money laundering, which facilitated the diversion of
the funds into stock market. Brokers imparted greater
liquidity in the market. Even if we consider clearing and
settlement process, it was 15 days which gave enough time
to these brokers to keep money with them.
Some fluctuations had caused sensex to fall to 2,037 points
by April 1993. However after the entry of foreign
institutional investors (FIIs), the index started rising again
from mid-1993, and by February 1994 it recovered much of
the losses and reached 4,286. By December 1994, the index
reached the 4,631 points which was post-scam high.
Analysis of Ketan Parekh’s case &
Payment Crisis at Calcutta Stock Exchange
Effect on market (Sensex) Fell by 176 points
Was this an Insider trading
case?
Yes
What was Brokers role? Creating large buying
position in selected stocks
across various locations.
What happened to share
price?
Only k-10 stocks prices
rising up
What was unusual price
movement and Volatility
status?
Remained unchecked.

69
How was Market Surveillance
System?
Poor
What about the Liquidity in
stock market?
Greater liquidity was
imparted to stock market.
What happened to Capital
exposure limit of Banks?
Exceeded
How was Banking System? Poor and weak.
What was Funding
Mechanism ?
Simple Borrowing & BADLA
system
How long was Settlement
period ?
1 week
What about Record and
Margins ?
Lack of records and margins
at Calcutta Stock Exchange.
How Pay-in/pay-out was
done?
Brokers and Trading
members. No PCM were
involved.
There was a fall in sensex by 176 points immediately after the
exposure of scam and further by 147 points post arrest of
accused Ketan Parekh. I would relate this case not only with
money laundering but also with the “insider trading” to some
extent because in this scam company promoters were together
involved with the brokers.
Brokers had created large buying positions at various
locations. Brokers had formed a chain of networks across
exchanges, and persuaded innocent investors to buy selected
stocks and built up large buying positions. SEBI ignored such
things. When huge trading order for these stocks were getting
placed and prices of selected k-10 stocks were rising, SEBI
watched it as normal activity over the period of 18 months. It
could have raised a question or doubt that why only the prices
of K-10 stocks were rising. When whole Information,

70
Communication, Entertainment sector was booming, why
didn’t the prices of stocks of companies belonging to same
sector also increased. Moreover the annual report to look into
growth and earning prospectus of K-10 companies were not
asked by SEBI or Bombay Stock Exchange. This clearly shows
that investment in such stocks were done deliberately, to
inflate their prices and hence Market Surveillance System of
stock exchange was also poor which did not act diligently.
Greater liquidity was imparted to stock market, as some banks
had exceeded their capital market exposure limit. Banking
system was also poor and weak as, it allowed to give loans
without proper collateral. Settlement period was still 1 week
thus giving enough time in movement of securities and funds.
There was lack of record and margins at Calcutta stock
Exchange, due to which CSE was engulfed in payment crisis.
CSE officials used Settlement Guarantee Fund to settle the
transactions and come out from the payment crisis of its
defaulter brokers. If SGF would not have been there, CSE
would have died.
Analysis of Exceptional Market
Conditions/Price Rigging Cases/Margin
Deposits
Following risk scenarios have been identified from the cases and
measures that could help best have been suggested.
Scenarios Effective Measures

71
Checking of Intra-day price
movement of particular
security.
Applying security specific circuit
breaker rather than index-based
circuit breaker. A security
specific circuit breaker will halt
the trading in that security only
but index-based trading will halt
the trading in entire market, i.e
market will be closed.
To avoid risk to settlement and
to ensure smooth clearing and
settlement process.
Collection of sufficient margins
from the client on upfront basis,
according to volatility of stock
and its trading frequency.
To keep track record of client
until transaction is settled.
Obtaining basic details and
verification of details by brokers
/ trading members.
To check any unusual price
movement or unusual trading
pattern in any scrip.
A Pro-active Market Surveillance
System
Ensuring continuous online
monitoring with immediate
generation of alert to trading
members.

72
11. CONCLUSION
As the objective of this project was to analyze the whole risk management
framework of Indian stock market and how much efficient it is, so in regard to
this, some of the strengths and weakness in this framework have been identified
after going through all the incidents and cases taken in the study. They have
been mentioned below:
Strength or Efficiency of present risk management framework
lies in following:
 The way Index-based Circuit breaker / Securities specific price
band has been implemented by our stock exchanges, which have
been proven efficient in checking volatility and protect market in
some of the exceptional scenarios faced by stock market in past.
 Time to time margin Deposits as a collateral from the client on
their open position and at broker level, it is gross of all the net
positions across all the clients, thereby ignoring any netting-off that
may occur between client-client and client proprietary positions.
 Segregation of trading and clearing and settlement process by the
way of clearing corporation has guaranteed the smooth settlement
of all the transactions taking place at exchange.
 The need for sufficient Settlement Guarantee Fund across all the
stock exchanges, has proven to be good way to reduce any
systemic risk. With the help of STF ,CSE had managed to
overcome the payment crisis.
Margining framework that has evolved for mitigation of risk to CC has given
rise to another risk, the risk of clients losing their collateral in the event of
default/bankruptcy of the broker or TM, CM, and accordingly there is a need to
take steps to mitigate this. However, even in presence of such measures

73
implemented the various scams that have occurred in the past shows that our
risk management framework is still not very much efficient and there can be
further improvement. Areas where improvement needed is
 Brokers’ role
 Settlement period.
 Checking /prevention of insider trading.

74
BIBLIOGRAPHY
1. National Stock Exchange of India Ltd, 2014.Trading. [online] Available from:
http://www.nseindia.com/products/content/equities/equities/trading.htm
2. National Stock Exchange of India Ltd, 2014. Clearing and settlement-
equities.[online] Available from:
http://www.nseindia.com/products/content/equities/equities/clearing_settlement.htm
3. National Stock Exchange of India Ltd, 2014. Funds settlement. [online] Available
from: http://www.nseindia.com/products/content/equities/equities/funds
4. http://www.bseindia.com/markets/equity/EQReports/tra_Settlement.aspx?expandable
=6
5. National Stock Exchange of India Ltd, 2014. Circuit Breaker. [online] Available
from:
http://www.nseindia.com/products/content/equities/equities/circuit_breakers.htm
6. National Stock Exchange of India Ltd, 2014. Margins. [online] Available from:
http://www.nseindia.com/products/content/equities/equities/margins.htm
7. Bombay Stock Exchange Ltd, 2014. Surveillance. [online] Available
from:http://www.bseindia.com/markets/equity/EQReports/sur_Surveillance.aspx?exp
andable=6
8. Bombay Stock Exchange Ltd, 2014. Value at Risk(VaR) Margin & Extreme Loss
http://www.bseindia.com/markets/equity/EQReports/margin.aspx?expandable=2
9. Intelivisto Consulting India Private Limited, 2012. Surveillance in securities markets.
http://www.intelivisto.com/blog/surveillance-in-securities-markets/
10. http://www.sebi.gov.in/sebiweb/userview/detail/2/388/No%20of%20Stock%20Excha
nge
11. http://www.sebi.gov.in/annualreport/9900/ar99002f.html
12. Calcutta Stock Exchange, 2012. Default [online] Available from:
http://www.cseindia.com/new_web/chapter_xviii.php
13. http://www.legalcrystal.com/57495
14. Network Magazine, 2003. NSE’s disaster recovery initiatives [online] Available from:
http://www.networkmagazineindia.com/200304/case1.shtml
15. Financial Literacy Agenda For Mass Empowerment, 2011. Harshad Mehta & Ketan
Parekh Scam [online] Available from: http://flame.org.in/knowledgecenter/scam.aspx

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