Indian brokerage head arrested

Influential broker Ketan Parekh is led to a court session on April 9

In this story: First shuttering of non-Indian broker SEBI trying to beef up reputation RELATED STORIES, SITES

MUMBAI, India -- Indian authorities have arrested the head of one of three brokerages closed by regulators.

First Global head Shankar Sharma was arrested late Thursday night for allegedly threatening an income-tax official, the company confirmed Friday.

Sharma, an investor in Web site Tehelka.com, was responding to a summons.

In a separate crackdown, the Securities and Exchange Board of India (SEBI) has slapped multi-year bans on three Indian companies for manipulating stock prices.

India's market regulator also barred a former stock market star for life.

The bans on the three companies -- BPL, Sterlite and Videocon -- stem from an earlier price-manipulation scandal that bears a striking resemblance to the continuing SEBI investigation.

First shuttering of non-Indian broker

Sharma's brokerage was shuttered by SEBI Thursday. The investigation stems from a share-price crash on March 2.

SEBI also froze the operations of Credit Suisse First Boston (CSFB) and Nirmal Bank Group.

SEBI believes broker-driven short selling caused a recent plunge in its markets. The steps against CSFB mark the first time SEBI has barred a non-Indian broker.

It also banned several units of First Global Securities and Nirmal Bank Group, both based in Mumbai. The brokerages can challenge the ban on April 30.

A spokesman said CSFB, which only weeks ago saw a unit convicted of obstructing a government inspection in Japan, is considering its options.

First Global may ask for an early hearing, according to one official. Sharma was due to appear in court in Mumbai Friday on charges of non-cooperation and intimidation of a government official.

Sharma bought a 14.5 percent stake in the parent company of Tehelka.com in July 2000. The news site unleashed a political firestorm for Prime Minister Atal Behari Vajpayee's government when it released video footage showing officials accepting bribes in exchange for arms contracts.

Sharma denies the market-manipulation charges. He says his brokerage conducted business as usual.

The government has claimed Sharma knew about the Tehelka scandal and used the opportunity to sell into the market.

SEBI trying to beef up reputation

SEBI is trying to beef up its reputation. It is often seen as an ineffective regulator in a market plagued by scandal.

After SEBI launched an investigation, influential Mumbai-based broker Ketan Parekh was arrested on charges of market manipulation over the March 2 selloff.

The plunge came one day after the Indian government presented an investor-friendly budget. The BSE dropped 42 percent through April 16.

Local reports say that SEBI believes the three brokerages formed a cartel that deliberately drove stocks down with short selling. But SEBI reportedly believes more brokerages were also involved.

The bans on BPL Ltd., Videocon International Ltd. and Sterlite Industries Ltd. stem from a mid-1998 investigation into a price-rigging scandal involving Parekh's predecessor as the "big bull" on the Bombay Stock Exchange, Harshad Mehta.

Mehta was permanently debarred Thursday and will not be able to trade securities in India. BPL was banned from India's markets for four years, Videocon for three years and Sterlite for two.

SEBI has already suspended 17 brokers for their part in the scandal. SEBI found that seven companies controlled by Mehta rigged the share prices of the three companies.

On Thursday, SEBI also launched prosecution proceedings against Mehta and 11 top officials at the three companies.

In a preemptive move, Mehta filed an action in Bombay High Court claiming that SEBI had not followed proper procedures.

Indian broker denied bail again

Securities & Exchange Board of India

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