Ketan Parekh — the disgraced stockbroker behind the stock market scam in 2001 who was barred from the securities market for 14 years — is in trouble once again.
The market regulator issued an interim order on Thursday barring him again from “buying, selling or dealing in securities or associating with any intermediary registered with Sebi, either directly or indirectly, with immediate effect”.
The market regulator also barred Rohit Salgaocar, a Singapore-based stockbroker, and Ashok Kumar Poddar of Calcutta from trading in securities.
Ashok Poddar has been a close associate of Ketan Parekh since the 1990s. He was also debarred from the securities market along with KP in the stock market scam of 2001.
It also found evidence of unlawful gains worth ₹65.77 crore which has now been impounded.
Sebi also ordered banks to freeze the accounts of the 22 noticees named in the interim order and said no debits could be made without the permission of the regulator. However, the bank accounts of noticees 3 and 4 — GRD Securities and Salasar Stock Broking — will not be frozen since these stockbrokers deal with client funds.
The investigation
The regulator trawled information meticulously from phone chats, WhatsApp conversations, and terse missives over Bloomberg terminals to lay bare the dimensions of the scandal. Later, it conducted raids on several firms and grilled the people involved before putting together the 188-page interim order.
The report says Salgaocar was the director of Strait Crossing Pte Ltd which had entered into an agreement with Motilal Oswal Financial Services and Nuvama Wealth Management to refer trades of an unnamed Big Client to them.
Motilal Oswal and Nuvama had no role in this front-running scandal.
The interim order comes after a detailed investigation carried out between January 1, 2021 and June 20, 2023, into the front-running racket where Ketan Parekh was orchestrating trades in shares of companies in which an unnamed Big Client was interested.
“The traders of the Big Client used to consult Rohit Salgaocar prior to placing in Indian markets; thus Rohit Salgaocar allegedly had access to non-public information (NPI) with respect to substantial impending transactions in various scrips.
The order says Salgaocar communicated the “impending orders of the Big Client” to Ketan Parekh. Parekh, in turn, instructed the other noticees to execute orders through the trading accounts of the six front-running firms.
The Sebi order puts the spotlight on a bunch of stockbrokers and their firms based in Calcutta who were executing stock market transactions on the orders of Ketan
Parekh.
Besides Ashok Poddar, this group included six front-running entities or individuals: GRD Securities, Salasar Stock Broking Ltd, Anirudh Damani, Ashok Kumar Damani, Basukinath Properties Ltd, and APR Properties Pvt Ltd.
The order also mentions the names of three facilitators: Sanjay Taparia, Ashok Kumar Poddar, and Sumit Sonthalia, Priya Saraf, Shyam Saraogi, Pradeep Saraogi and Rachit Poddar.
It also names seven others who were directors of the firms that handled the stock transactions under orders from Ketan Parekh and his close associates.
Code names
Sebi said that the frontrunners (or FRs) used complex trading strategies to take advantage of the prior knowledge of the impending trades of the Big Client.
The market regulator added that the modus operandi was such that FRs were receiving trade instructions through WhatsApp chats or calls from a person whose contact number was saved in the devices as `Jack/Jack New/Jack Latest New/Boss’.
Upon close analysis of the contact numbers, it was found that they belonged to Parekh who was receiving the non-public information (NPI) from Salgaocar. After receiving specific and timely instructions, directly or indirectly, from Parekh, the FRs used to execute orders and made unjust profits.
Illustrating how the operation worked, Sebi said that on November 11, 2022, two funds of the Big Client sold 52.5 lakh shares of the PB Fintech (Policy Bazaar) share. Soon, three alleged FRs — GRD Securities Ltd, Salasar Stock Broking Ltd and Anirudh Damani — matched their trades with that of the Big Client for 20.61 lakh shares.
Similarly, two FRs undertook NPI-based trades in Titan Ltd on April 5, 2023. This was against the orders of one of the funds of the Big Client.
The market regulator has barred the 22 noticees from disposing of or alienating their assets or properties till the amount of unlawful gains is credited into an interest-bearing savings account.
They have also been directed to square off any derivative contracts within three months.
All noticees have been given 21 days’ time to file their replies with Sebi and avail of an opportunity for a personal hearing if they so desire.
