The easy manipulation of Reliance -- one of the most liquid scrips -- shows how simple it is to distort the shallow Indian market. But, the government has decided that the confused overlapping of regulatory responsibilities between SEBI and the Department of Company Affairs (DCA) is a minor matter. The absence of coordinationbetween the two agencies as well as the pathetic track record of the DCA have also been considered inconsequential. Instead, under great pressure from the government, SEBI has hastily announced share buyback guidelines without even waiting for the DCA to clarify contentious issues relating to regulatory jurisdiction or taxation. The tough guidelines by themselves are meaningless without either SEBI or DCA wielding adequate regulatory and punitive powers. Postal ballots could have offered some protection to minority investors, but the ordinance has ignored this too. Since the concept of postal ballots for share buyback had been accepted by the previous government, one presumes that it is corporate pressure which ensured its omission. Merely 10 to 12 per cent of investors attend general body meetings of companies, hence postal ballots would have ensured that buyback resolutions are not pushed through at meetings held in remotely located registered offices.

SEBI sources argue that introducing postal ballotsneeded an amendment to the Companies Act. Others insist that nothing really prevented their introduction through the ordinance or through SEBI guidelines. The ordinance does not even prevent family controlled managements from voting on the issue even though they are clear beneficiaries.

Is it fanciful to imagine that companies will misuse share buyback and manipulate prices? Let's look at corporate track behaviour in the nineties alone.

The willingness of companies to participate in a big way in manipulating their share prices was demonstrated by Harshad Mehta in 1992. The securities scam showed that Mehta had a deal with several companies whose stock rose astronomically during his reign over the capital market. These managements supplied him with price sensitive information and even timed their public announcements to ensure further price increases. Like several aspects of the securities scam, this too was quietly buried by the multi-party conspiracy of the Joint Parliamentary Committee, becausedetailed investigations would have led to several public sector undertakings and the politicians who controlled them. Nothing still prevented the DCA from probing the matter, but once the scam had been handed over to the CBI everybody else washed their hands off the investigation.

The infamous preferential allotments of 1994-95 and the secondary market price rigging which came to an end with the arrest of Pawan Sachdeva in the M.S.Shoes case, again demonstrated that companies have always been getting away with it. The ham-handed investigation of the M.S. Shoes case has ensured that price rigging by a whole section of unscrupulous promoters was simply abandoned. The absence of adequate protection for small investors in the buyback rules is more shocking because SEBI is right in the middle of investigating yet another instance of management connivance in price manipulation.

Harshad Mehta's most recent foray into market manipulation in 1997-98 points to the involvement of at least four companies in therigging up their prices. SEBI is investigating the role of the Sterlite, Videocon, BPL and Pentafour managements in Mehta's activities and the subsequent bail out of brokers when prices collapsed and led to a payment crises in June.

Reliable sources tell me that SEBI, already has clinching evidence against at least two of these companies. Under pressure from the stock exchange, the companies had bailed out brokers who were unable to make payments in June, by buying up their shares though a few broker fronts. The share were paid for, directly through subsidiaries, leaving a loud audit trail. I hear that the managements have mounted political pressure to scuttle the investigation and are attempting to place the shares with friendly institutional buyers.

While brokers and managements are working at protecting themselves, the crash in these share prices has left investors high and dry. Is there any reason to believe that the implementation and monitoring of share buyback will be any better?