Financial Scams in India(Securities Scam 1992 Case)

What is Scam?

Definition: obtaining money by means of deception including fake personalities, fake photos, fake template letters, non-existent addresses and phone numbers, forged documents. Also called Plunder

Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws.

Top 10 Financial Scams in India

• Insurance Scam (1947)

• Securities Scam (1992)- Harshad Mehta

• UTI Scam (2001)

• Home Trade (2000)

• Securities Scam (2001)

Ketan Parekh

• DSQ Software (2001)

Conti…

• Satyam (2009)

• Fake Stamp Papers (2006) - Abdul Karim Telgi

• IPO Scam (2005)

The list goes on & on & moreover there are continuous additions to the same.

'Big Bull‘ of Indian stock market???

Harshad Mehta Timeline• Harshad Shantilal Mehta was born on 29 July

1953, at Paneli Moti, Rajkot district, In a Gujarati Jain family

• After completing his secondary education, Harshad left for Bombay and joined Lala Lajpat Rai College for a Bachelor’s degree in Commerce.

• Harshad Mehta started his working life as an employee of the New India Assurance Company.

• In the early eighties he quit his job and sought a job with stock broker P. Ambalal affiliated to Bombay Stock Exchange.

• He became a jobber on BSE for stock broker P.D. Shukla after that.

• In 1981 he became a sub-broker for stock brokers J.L. Shah and Nandalal Sheth.

• By 1991, Mr Mehta had become the most recognisable and revered icon of the stock market.

• Mehta died in 2002 with many litigations still pending against him

• Diversion Of Funds.

• Use Of Ready Forward (RF) To Maintain SLR(Statutory Liquidity Ratio).

• Creative Accounting.

• Intra- Day Trading.

What is Harshad Mehta Scam All About?

HIS FAVORITE STOCKS INCLUDED

• ACC• APOLLO TYRES• RELIANCE• TATA IRON AND STEEL CO. (TISCO)• BPL• STERILITE• VIDEOCON

What he did?• He TRIGGERED THE RISE IN BOMBAY STOCK

EXCHANGE IN THE YEAR 1992 BY TRADING IN SHARES AT PREMIUM ACROSS MANY SEGMENTS

• TAKING ADVANTAGES OF LOOPHOLES IN THE BANKING SYSTEM, HARSHAD AND HIS ASSOCIATES TRIGGERED A SECURITIES SCAM DIVERTING FUNDS TO THE TUNE OF RS 4000 CRORES FROM THE BANKS TO STOCK HOLDERS BETWEEN APRIL 1991 TO MAY 1992

How he caught

• On april 23 1992 journalist sucheta dalal exposed mehta’s illegal methods in ‘TIMES OF INDIA’

• The crucial mechanism through which the scam was affected was ready forward(RF) deal.

• The index fell from 4500 to 2500 representing a loss of Rs. 100,000 crores in market capitalization.

• There was a chaotic situation in the market.• The Government liberalization policies came

under criticism.• It received political pressure and bad press.• The Securities Exchange Board of India

(SEBI) postponed sanctioning of private sector mutual funds.

Impact Of The Scam

After Effects• HM WAS ARRESTED AND BANED FOR LIFE

FROM TRADING IN THE STOCK MARKETS• MAJOR CULPRITS WERE BROKERS, BANKERS

AND FINANCIAL INSTUTIONS.• HM WAS CHARGED WITH 72 CRIMINAL

OFFENCES. A SPECIAL COURT ALSO SENTENCED SUDHIR MEHTA, HARSHAD’S BROTHER, 6 OTHERS, INCLUDING FOUR BANK OFFICIALS.

• Lifestyle.

• 31st December 2001- The Death Of The Bull.

• Remembered as the architect of the Rs.50 billion scam.

The End Of Harshad Story

• Be aware if someone Is over loyal o you later he may project the true colors.

• Carrying on with illegal activities may lead to exploitation of self image in public.

• God has gifted us with powerful organ called “BRAIN” to succeed in life through legal means and not by dumping others.

Learning

Ketan Parikh

What he did?

How he caught

After Effects

Thank You!

Speculators

• Bull • Bear• Stag• Lame Duck• Arbitrageur