The Telegraph
Since 1st March, 1999
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Scam hunt with US cop

New Delhi, June 16: The Securities and Exchange Board of India (Sebi) today said it will sign an agreement with the Commodities and Futures Trading Commission (CFTC) of the US to share sensitive stock market information to help screen out possible scams which, the regulator feels, has started taking global dimensions.

“The memorandum of understanding (MoU) would be signed within the next two months,” Sebi chairman G. . Bajpai told reporters in front of the North Block building which houses the ministry of finance. “Talks are at an advanced stage.”

The MoU would ensure “smoother” flow and “exchange” of information on illegal market practices and enforce compliance with a country’s securities law. “Under this agreement, Sebi can ask CFTC to furnish us specific details on illegal market practices and take appropriate measures,” said a senior Sebi official.

He said Sebi has an informal agreement with CFTC and, at times, it is difficult to get information since there are legal impediments to sharing it.

“The guidelines would be framed for supervising and monitoring futures market and compliance with the relevant laws and regulations,” he added. “The framework would be formed by officials of CFTC and Sebi.”

Currently, Sebi has an information-sharing agreement with Mauritius, Malaysia and Sri Lanka. Government officials said the pact with Mauritius has almost stopped traders from routing money earned through illegal market practices.

The capital market regulator is planning a similar tie-up with its Chinese counterpart. The moves come after a series of market scams here, which saw Sebi unable to trace the flow of funds. For instance, the flow of funds through the Mauritius route could not be ascertained immediately in the stock market scam of 2000-01.

Bajpai also said Sebi is probing the rise of state-run bank stocks, which registered one of the highest market capitalisation on bourses. However, he refused to say when the probe would be completed.

The regulator is concerned about allegations the bank stocks increase along with those of Indian Oil Corporation and IDBI. It suspects manipulation by speculators of a magnitude similar to that of the 2001 scam. Sebi is also investigating the abnormal rise in stock prices of Indian Oil prior to its bonus issue announcement. The IDBI share has also trebled in a short time, prompting Sebi to launch a probe into the increase.

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