THE BIG BULL SCAM

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Navin Pal 21

Lav Hotkar 17

Neeraj Bidlan 22

BACKGROUND Name: Harshad Shantilal Mehta

Born in: 29 July 1953

Died in: 31 December 2001

Profession: Chartered Accountant & Stockbroker

He earned degree in Bachelor of Commerce

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

He took advantages of loopholes in banking system

He triggered SENSEX in 1992 & made the scam by diverting funds of Rs.4,000 crore

UNETHICAL ISSUES IN MEHTA SCAM Imaginary companies created Bought the shares of own company by

himself causing Sensex up Purchased Huge amount of shares of a

targeted company like ACC . Created fake BRs, or BRs not backed by any

government securities Illegally issue of BR by small bank Without verification, banks like “Vijaya Bank”

issued the cheque Recommendation to purchase particular

shares on his own website

PEOPLE INVOLVE Harshad Mehta & His Associates. Sudhir Mehta. Bank of Karad (BOK). Metropolitan Co- Operative Bank. Vijaya Bank.

ACTUAL SITUATION OF SCAM

Mehta soon mastered the tricks of trade by managing several brokers and set out on dangerous game plan

Mehta has siphons off the huge money from several banks and million of investors were connecting the process.

His scam was exposed and the market crashed.

EXPLOITING THE LOOP HOLE IN THE BANKING SYSTEM

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 crore from the banks to stock holders between April 1991 to may 1992.

He was arrested and banned for life from trading in the stock markets

Major culprits were brokers, bankers and financial institutions.

He was charged with 72 criminal offences. A special court also sentenced Sudhir Mehta, harshad’s brother, 6 others, including four bank officials.

They got rigorous imprisonment from 1 year to 10 years on a charge of dumping state bank of India to the tune of RS. 600 crore in connection with the securities scam than rocked the financial markets in 1992.

IMPACT OF SCAM ON MARKET

THE END OF BULL STORY… Lifestyle (flashy cars and life like a celebrity) 31st December 2001- the death of the bull Forever remembered as the architect RS. 50

billion scam

REGULATORY ACTIONS TAKEN AGAINST MEHTA

He was later charged with 72 criminal offenses, and more than 600 civil action suits were filed against him

He was arrested and banished from the stock market

Mehta and his brothers were arrested by the CBI on November 9, 1992 for allegedly misappropriating more than 27 lakh shares of about 90 companies

EFFECT ON SOCIETY There is no effect on societyReasons:- Acts only if it affects People forget things easily Government taking things lightly THUS Within 10 years history repeated Same things Same story Same people Same Government Just a new name to blame Ketan Parekh

RECOMMENDATIONS Normal transactions must be allowed to be

done openly and transparently, and the role of brokers as market makers must be recognized.

Artificial barriers between the money market and the capital market, between the market for corporate securities and the market for government securities and between the formal money market and the informal one must be eliminated.

CONCLUSION Harshad Mehta was brave stock broker. He

knew the loopholes in banking system as well as how to exploit that loopholes. His whole intension to do this was to rise in SENSEX.