Investor bodies have demanded an investigation into the manner in which additional 31 stocks for derivatives trading on the stock exchanges (SEs) were cleared by the Sebi and then reversed partially. Criticising the casual approach adopted by the BSE, NSE and Sebi in the selection and clearance of these additional stocks, Investors’ Grievances Forum (IGF) president Kirit Somaiya, said: “The adhocism adopted by the capital market-related institutions reflects how casually these institutions have ignored the fiasco of ALBM and badla last year”. Last week, Sebi cleared the list of additional 31 stocks submitted to it by the SEs but within 24 hours, it asked the SEs to put on hold derivatives trading in six stocks till further instructions. The six stocks are: Aftek Infosys, Zee Telefilms, HFCL, Global Tele (GTL), Silverline Technologies and SSI. As reason, Sebi cited its investigations pertaining to the stock market crash of March 2001, which is still on in some of these companies stocks. It also pointed out that some of these companies have been indicted in chapter seven of the Joint Parliamentary Committee (JPC) report.Somaiya cited the same chapter seven on the role of promoters and corporate entities of the JPC report which said: “.Though it may be possible to contend that Sebi did not enjoy the authority to directly investigate corporate entities which might have, through various channels, provided funding in the stock market, that the promoters and corporate entities were, at the relevant time, playing a significant role cannot be denied.” It further said that “the Department of Company Affairs, one of the entities having regulatory authority could have, had it informed itself of this or been alerted to the role of promoters and corporate entities, taken timely action in the matter diversion of funds allocated to specific projects for use in the stock market for the purchase of specific scrips, investment companies operating in the stock market through brokers, nexus between brokers and corporate entities in the context of interest of brokers in specific corporate entities, which facts have now come to light, establish the nexus between brokers and corporate entities. The proximity of promoters and brokers is also established by the frequency with which both acted in collusion by the use of circular trading in respect of shares of certain companies”. In this context, he said some of the stocks that were dropped from the list were selected on the basis of one of the criteria of liquidity (trading volume in past six months).
