...An Analysis of the Securities Scam -Highlighting Harshad Mehta Synopsis Securities Scam, as it is called, is a name given to the diversion of funds from the banking system to a set of individual stockbrokers through a series of transactions. The duration of the scam was around 11 months, from May 1991 to April 1992. The report primarily describes: * The basic difference between capital market and money market * Why was their room for the scam to happen * How the scam got originated * Who were the key players * What system flaws turned a plan to a scam * How the plan got exposed * Response of the government * Impact of the scam * Policies required Starting with the basic explanation of capital markets and money markets, let us try to understand the points of difference between the two. Point of Difference | Securities Market | Stock Market | Key Players | * Banks * Financial institutions | * Individuals * Companies | Intermediaries | Around a dozen brokers approved by the Reserve bank of India | About 500 brokers approved by Bombay Stock Exchange | Capitalization | Rs 100000 crores | Rs 250000 crores | Finance | Formal money market | Informal money market (Badla market) | Cost of Finance | 18-20% | 35-40% | Number of Transactions | 250 per day | 50000 per day | Trading Volume | Rs 3000-4000 Crores per day | Rs 50-200 Crores per day | We can observe from the table that there is a great difference between...
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...htm&ei=3CTnUInpD8XXkAXy8YGIAg&usg=AFQjCNGa4sSOYe-mM9SHLOBcZLMhgR_uOA&bvm=bv.1355325884,d.dGI 2. What Harshad Mehta did? – The Stock Scam 3. In the early 1990s, the banks in India had to maintain a particular amount of their deposits in government bonds. This ratio was called SLR ( Statutory Liquidity Ratio). Each bank had to submit a detailed sheet of its balance at the end of the day and also show that there was a sufficient amount invested in government bonds. Now, the government decided that the banks need not show their details on each day, they need to do it only on Fridays. Also, there was an extra clause that said that the average %age of bond holdings over the week needs to be above the SLR but the daily %age need not be so. That meant that banks would sell bonds in the earlier part of the week and then buy bonds back at the end of the week. The capital freed in the starting of the week could then be invested. Now, at the end of the week many banks would be desperate to buy bonds back. This is where the broker comes in. The broker knew which bank had more bonds (called ‘plus’) and which has less than the required amount (called ‘short’). He then acts as the middleman between the two banks. Harshad Mehta was one such broker. He worked as a middle man between many banks for a long time and gained the trust of the banks’ senior management. Lets say that there are two banks A (short) and B (plus). Now what Harshad Mehta did was that he told the banker at A that he was dealing with many banks and...
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...are still missing. These are adequate supervision, strict accountability, and appropriate punishment. As a result, the markets have remained shallow and stunted and have lurched from one financial scandal to another over the last decade. Corporate governance has been emerged as an important reform in capital market because of various scandals in the field of capital market. After this reform, the markets have become transparent and accessible uniformly to everyone in the country, without bias to caste, religion, gender or location. However, it has been a central issue in developing countries even long before the recent spate of corporate scandals. The various corporate scandals in India include: Ketan Parekh scam, Harshad Mehta scam, CRB scam, Satyam scam etc. Security scams and financial scandals have lead to the manipulation of large amount of money, bloating stock markets and sensex. Even the financial markets having regulatory authority and empowered legal sections have failed in providing good corporate governance to some extent. But corporate governance and economic development are interrelated. Poor corporate governance hinders the development of economy while good corporate governance builds the confidence of outsiders to use financial accounting reports and statements within their business or for financial specialties, removes mistrust between various stakeholders and also reduces the risk of nationwide financial crisis. Effective corporate governance promotes the development...
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...ETHICS IN FINANCE Meaning of Ethics Ethics is the study of human behavior which is right or wrong. In general, ethics means doing right things to others, being honest to others, being fair and justice to others. Even ethics in finance is a compartment to general ethics. Ethics are very important to maintain constancy in social life, where people work together with one another. In the process of social development we should not be conscious of ourselves but also conscious to take care of others. WHAT IS FINANCE Finance means fund or other financial resources; it deals with matter related to money and the market. The field of finance refers to the concept of time, money and risk and how they are interrelated. Banks are the main facilitators of funding. Funding means asset in the form of money Finance is the set of activities that deals with the management of funds. It helps in making the decision like how to use the collected fund. It is also art and science of determining if the funds of an organization are being used in a right manner or not. Through financial analysis, any company or business can take decision in making financial investments, acquisition of company, selling of company, to know the financial standing of their business in present, past and future. It helps to stay competitive with others in making strategic financial decisions. Finance is the backbone of business; no business can run without finance. WHAT IS ETHICS IN FINANCE Ethics in finance...
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...Submission of Research paper as a part of curricular activity. Forensic Accounting: A new dynamic approach to investigate fraud. SUBMITTED BY: Aniket Desai (12BBL016) Alakananda Duggirala (12BBL016) Rut Shah (12BBL051) SUBMITTED TO: Dr. Pranav Saraswat For the academic session July to December 2014 1 PREFACE This research project is carried out as a part of curricular activity for the course of Financial Audit, in semester V for the programme B.com LLB (Hons.). We have tried our best to do justice with the project and put it in black and white the research we've done in the last three months. Regards, Aniket Desai Alakananda Duggirala Rut Shah Date: 2th November, 2014 _______________________________ Signature of the researchers. 2 ACKNOWLEDGEMENT We owe a debt of gratitude to Dr (Mr.) Pranav Saraswat, the faculty for the course of Financial Audit, for his constant guidance and support which helped us to conceive this research project. It is also my duty to record my thankfulness to Dr. Atul Bhatt, the librarian of the Institute of law, Nirma University for keeping handy useful resources which helped me collect information and datas which was very important for my doctrinal research work. Finally, I would like to take this opportunity to thank my friends and colleagues for the support whenever required. Regards, Aniket Desai Alakananda Duggirala Rut Shah 3 DECLARATION We hereby declare that this piece of written work...
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...Corruption Sanchit Avasti Roll no. 03 TYBMM Introduction of corruption What is Corruption? In philosophical, theological, or moral discussions, Corruption is spiritual or moral impurity or deviation from an ideal. In economy, Corruption is payment for services or material which the recipient is not due, under law. Corruption means the state of being bad and dishonest, especially in matters concerning money. It creates a very impact to the country's education, occupation, living style and mostly the humanity. Corruption affects all regions of the world and all levels of society, but the impact is greatest in developing countries. Every year, developing countries lose USD 50 million to 100 million through corrupt acts Corruption undermines political, social and economic stability and damages trust in institutions and authorities. It also fuels transnational crime. Terrorists and organized criminals are aided in their illegal activities by the complicity of corrupt public officials. Types of Corruption Corruption became a sway all over the world now-a-days. It can be categorized in three types. There are three broad classifications of corruption, which are however not mutually exclusive: Petty and Grand corruption: Petty Corruption: • Practiced on a smaller scale. Defined as the use of public office for private benefit in the course of delivering a pubic service. Usually involves relatively small amounts of money, including bribery (grease money or speed...
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...Examination Paper IIBM Institute of Business Management Examination Paper Corporate Governance Section A: OBJECTIVE TYPE (20 marks) MM.50 • • • This section consists of Multiple choice questions. Answer all the questions. Questions carry 1 mark each. 1. In the second version of McKinsey’s model called “the Central model” governance chain is represented by a. Well-developed equity market & dispersed ownership b. Underdeveloped equity market & concentrated ownership c. Well-developed equity market & concentrated ownership d. Underdeveloped equity market & dispersed ownership 2. Corporate governance refers to a combination of law, rules, regulations and a. Value b. Wealth c. Voluntary practices d. Customer Satisfaction 3. ____________, is one of the major tools. Corporations use to direct persuasive communication to target buyers & the public. a. Advertising b. Media c. Press d. None 4. Policy adopted by the monetary authority with respect to the supply of money is called a. Monetary Policy b. Fiscal Policy c. Budgetary Policy d. Economic Policy 5. Cash reserve requirements refer to the a. Purchase & Sale of government securities & other approved securities by the Central bank. b. Changes in bank rate by the Central Bank c. That portion of bank’s total cash reserves which they are statutorily required to hold with the RBI. IIBM Institute of Business Management 1 Examination Paper d. The particular level of liquid ity maintained by commercial banks. 6. This committee...
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...Understanding IPOs and IPO Scams You don’t have to spend too much time around the stock market to discover that there’s something fishy about many stocks’ initial public offerings, (IPOs). The standing joke is that IPO really stands for “It’s Probably Overpriced”. While that may or may not be true in any given case, there are a large number of pitfalls awaiting the would-be IPO trader or investor. It’s a case of caveat emptor, and in order to be suitably wary you need to understand how an IPO works and how it can be manipulated to your disadvantage. An IPO is the means by which a private company is sold to the public. The owners of the company will approach a major investment bank (sometimes referred to as a “bulge bracket” bank) to underwrite the IPO. That bank will then create a syndicate of banks and brokerages to run the IPO. Stock shares are then sold by the company to the syndicate and by the syndicate to the syndicate members’ customers. The deal can be structured a couple of different ways, but in general the syndicate guarantees they will find buyers for the shares, accepting financial risk if they fail. The syndicate sells the shares of the soon-to-be public company at a higher price then they acquired them. This gap is set as part of the underwriting contract, and has historically been about 7%. Once the shares have been “allocated” to the syndicate’s customers, the stock can begin trading on an exchange. The bulge bracket bank which lead the IPO typically...
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...CORPORATE GOVENANC Agenda for corporate governance reforms The need for corporate governance reforms in India is call of the hour as scams have become almost as an annual feature ever since we had liberalisation from 1991. Just from last 4-5 days we had been hearing about yet another alleged fraud involving thousands of crores by Kolkata-based Saradha group which may be a case of misuse/laundering by money generated by duping of lakhs of investors & public at large by Saradha group through their chit-fund and other money-pooling activities in West Bengal Capital market regulator SEBI has already passed an order against one group entity, Saradha Realty India, asking it to wind up all collective investment schemes and refund the money collected from investors. Besides, SEBI is also probing at least ten other Saradha entities for raising funds without the regulator’s approval. But question arises how come SEBI ,IT deptt ,Ministry of Corporate affairs and other enforcement agencies having so many guidelines & so called checks & balances allowed it to happen . How can we enact laws like Chit Fund Act 1982 which may have so many loose ends .This is not one of its kind case in India in recent past . We had the Harshad Mehta Scam, Ketan Parikh Scam, UTI Scam, Vanishing Company Scam, Bhansali Scam ,2G scam ,Coal scam and the story goes on this front unabated. To cut a long story short there is immediate need to revitalize in-house system of vigil ,ethics...
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...because of secrecy, it does reflect the magnitude. Conservative Estimate by Global Financial Integrity India’s standing per Transparency International India’s Corruption Perception Index: 3.3 Scale of 0 to10 10 (highly clean), 0 (highly corrupt) India The Republic of Scams India, Republic of Scams 2G Spectrum Allocation Fraud, 1.76 lakh crores (40 billion dollars) Classic example of collusion between politicians, industrialists and media with high powered brokers. Indian Government refuses to constitute a joint parliamentary committee of all parties to investigate the scam (that resulted in total deadlock in entire last parliamentary session). India, Republic of Scams 2G Spectrum Allocation Fraud(2010) India Today Jan 3, 2010 No tolerance for corruption or deception? Govt refused Joint Parliamentary committee because based on proportion of MPs there will be majority representatives from other parties who will be able expose those who actually received money and deposited in swiss and other safe havens? Who are they protecting? According to Dr. Swamy, Sonia has taken a big share of the loot deposited under her sisters names (Anushka and Nadia) India, Republic of Scams Commonwealth games (CWG) fraud 60,000 crores, 13 billion dollars (2010) [Conservative estimate!!!] CWG cost comparisons 2002 (UK): Rs 2,100 crores 2006 (Australia): Rs 5,000 crores 2010 (India): Rs 60,000 crores!!! 2014(UK,estimated): Rs 2,200 crores!!! Original...
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...Disinvestment and Privatisation in India Assessment and Options1 R Nagaraj2,3 Ownership reform in public sector enterprises (PSEs) initiated since 1991 has as yet been quantitatively modest. It is perhaps too early to judge the effects of these initiatives on their financial performance. While the slow pace of the reform can be perceived as an opportunity, there is perhaps merit in carefully reviewing the policy in light of economic theory, and comparative experience. As the bulk of the public investments are in industries with economies of scale and scope (with externalities that in principle invite considerable regulation), this study suggests an alternative institutional arrangement for improving PSEs’ financial performance: mutual stock holding among complementary enterprises tied around a public sector bank to minimise problems of soft budget constraint, dysfunctional legislative and bureaucratic interference, and to encourage close interaction between banks and firms to promote long term economic development. Introduction: Employing about 19 million persons, public sector currently contributes about a quarter of India’s measured domestic output. Administrative departments (including defense) account for about 2/5th of it, the rest comes from a few departmental enterprises (like railways and postal services), and a large number of varied non-departmental enterprises producing a range of goods and services. These include, close to 250 public sector enterprises (PSEs) owned...
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...Mens Rea in Statutory Offences In the field of law, it is important to understand each and every cause of each and every act. Only then can a sound judgment be given in a case. If the judge does not consider all possible aspects and possibilities, then he will draw the correct legal conclusion most of the times but, not always. One of the most important things to consider with regard to any offence is the mens rea, or the guily intention. This element of crime (mens rea) has been in the picture almost ever since criminal law has been known to exist. It had been incorporated in definitions of crimes as far back as The Code of Hammurabi (1700 B.C.) through the use of words like “intend” and “knowledge”. But, as the years have passed, complexities regarding the use of mens rea have arisen and the courts constantly keep trying to resolve the issues regarding the application of the rule. Generally the question that arises in cases is that whether mens rea is present or absent in the offender. But, sometimes, the question is whether it is required or not. This happens in case of statutory offences. They may expressly or impliedly rule out the requirement of mens rea. The current research study critically analyzes this situation and takes into account the existing views and decisions on the issue. Statutory Offence An offence is basically a violation of law. In legal parlance, the word “offence” is generally construed as a criminal wrong. Hence, offence means a wrong in penal...
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...Acknowledgement: First and foremost, I would like to thank to our course teacher Md. Nasir Shikder for the valuable guidance and advice. He inspired me greatly to work in this assignment. His willingness to motivate me contributed tremendously to my assignment. I also would like to thank him for sharing practical experience and showing us some document that related to the topic of our assignment. Besides, I would like to thank the authority of Southeast University for providing us with a good environment and facilities to complete this assignment and also for offering this subject “Media & Information Technology Law”. Finally, an honorable mention goes to my family and friends for their understandings and supports on me in completing this assignment. Without helps of the particular that mentioned above, I would face many difficulties while doing this. Abstract: “Fair is foul and foul is fair” recollecting the lines enshrined in Shakespeare’s play Macbeth, one could indisputably perceive what is contemplated acceptable today may conceivably be malevolent and vice versa perchance deplorable now and adequate in future. To understand the antagonism of free trial and free media one has to reflect on the evolutions of court and media and its present scenario. The judiciary and the media share a common bond and play a complimentary role to each other: man is the centre of their universe. Both the judiciary and the media are engaged in the same task: to discover the truth...
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...NTRODUCTION: AN INVITATION TO BOMBAY The envelope was hand-delivered to our house in Golf Links, Tan enclave in New Delhi whose name captured the clubbable lifestyle of its leisured and propertied Indian residents, soon after we had arrived in the middle of a north Indian winter to begin a long assignment. It contained a large card, with a picture embossed in red and gold of the elephant-headed deity Ganesh, improbably carried on the back of a much smaller mouse. Dhirubhai and Kokilaben Ambani invited us to the wedding of their son Anil to Tina Munim in Bombay. In January 1991, just prior to the explosion in car ownership that in later winters kept the midday warmth trapped in a throat-tearing haze overnight, it was bitterly cold most of the time in Delhi. Our furniture had still not arrived-a day of negotiations about the duty payable lay ahead at the Delhi customs office where the container was broken open and inspected-and we camped on office chairs and fold-up beds, wrapped in blankets. The Indian story was also in a state of suspension, waiting for something to happen. The Gulf War, which we watched at a big hotel on this new thing called satellite television, was under- cutting many of the assumptions on which the Congress Party’s family dynasty, the Nehrus and Gandhis, had built up the Indian state. The Americans were unleashing a new generation of weap- ons on a Third World regime to which New Delhi had been close; its Soviet friends were standing by, even agreeing with...
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...NTRODUCTION: AN INVITATION TO BOMBAY The envelope was hand-delivered to our house in Golf Links, Tan enclave in New Delhi whose name captured the clubbable lifestyle of its leisured and propertied Indian residents, soon after we had arrived in the middle of a north Indian winter to begin a long assignment. It contained a large card, with a picture embossed in red and gold of the elephant-headed deity Ganesh, improbably carried on the back of a much smaller mouse. Dhirubhai and Kokilaben Ambani invited us to the wedding of their son Anil to Tina Munim in Bombay. In January 1991, just prior to the explosion in car ownership that in later winters kept the midday warmth trapped in a throat-tearing haze overnight, it was bitterly cold most of the time in Delhi. Our furniture had still not arrived-a day of negotiations about the duty payable lay ahead at the Delhi customs office where the container was broken open and inspected-and we camped on office chairs and fold-up beds, wrapped in blankets. The Indian story was also in a state of suspension, waiting for something to happen. The Gulf War, which we watched at a big hotel on this new thing called satellite television, was under- cutting many of the assumptions on which the Congress Party’s family dynasty, the Nehrus and Gandhis, had built up the Indian state. The Americans were unleashing a new generation of weap- ons on a Third World regime to which New Delhi had been close; its Soviet friends were standing by, even agreeing with...
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