IT raids scare Kolkata brokers

IT raids scare Kolkata brokers
ENS ECONOMIC BUREAU

KOLKATA, MAR 25: Even as capital market was yet to recover from the shock caused by the payment shortfall at Calcutta Stock Exchange (CSE), brokers were keeping their fingers crossed following IT raids on six top brokers of the Bombay Stock Exchange last Friday.

The spectre of Income Tax action on CSE member brokers trade-related to six Mumbai ones raided by the department on Friday would cast a shadow when trading commences on Monday, CSE sources said. “If past experiences are any indication, there will also be an IT search and raids on at least some of the CSE brokers known to have trading relations with Mumbai brokers whose office premises were raided last week,” a senior CSE member said. CSE is famous for illegal badla business which is normally bigger than the official business there.Sensing trouble, CSE sources said, leading Kolkata firms had downed shutters on Friday evening much before schedule as soon as the news of IT raids in Mumbai came in. CSE brokers and investors had reportedly lost around Rs 1,000 crore in defaults in the illegal badla business.

Income Tax Department sources here said “country-wide raids on offices premises of some brokers, believed to be behind the recent price rigging which led to steep decline in the market, was planned, but postponed in Kolkata because of unavoidable circumstances.” The IT raids on the BSE had commenced after market hours and so its impact could not be felt on Friday, CSE sources said. The raids came at a crucial juncture when the capital market throughout the country was recovering from the impact of payment shortfall which began at this eastern region stock exchange on March 8, the sources said.Reports of IT raids in Mumbai came shortly after the CSE announced pay-out of Rs 230 crore for settlement number 1100150. It was expected that once this pay-out was completed, the market would be back on the path to recovery.

The sudden development evoked mixed response with a section of brokers fearing another steep decline, while others were confident that this would help in market recovery. Fuelling fears was the assumption by a section of marketmen that the SEBI might take action against the CSE board.

Another group felt superceding of the CSE board by SEBI at this point would not yield the desired result. “Only the existing governing board will be in a position to come out with a clear account how the entire issue was solved,” they said.Meanwhile, it was reported that CSE was forced to utilise its free reserves created over the past few years from its profits to clear the mess though officials denied any such move.

A section of CSE employees were extremely vocal at the Committee’s reported move to utilise free reserves to bail out brokers.

Taxmen seek trade details from six BSE brokers

MUMBAI:AFTER raiding six top stock-brokers on Friday, the Income-Tax Department has now asked for details of pay-in and pay-out related to two settlements after the presentation of the budget on February 28 from the Bombay Stock Exchange.

Investigating officials are looking at the possibility of the bear cartel raking in huge money from the price rigging exercise after the budget. “The exchange will give the information sought by the I-T department. This has happened earlier also,” said a BSE official.

“Pay-out figures at the end of each weekly settlement will give an idea of how much money each broker received and paid. This can be cross-checked with the information collected from the raids on individual brokers,” BSE sources said. Suspecting the hand of bear cartel in pulling down the market after the budget, market regulator SEBI has already banned short sales (selling without the back-up of securities).

While the I-T department has swooped down on former BSE president Anand Rathi, First Global, Ketan Parekh, Nirmal Bang, RS Damani and Rakesh Jhunjhunwala, it is yet to zero in on some others who are being targeted by the SEBI investigation team. A joint team of SEBI and the stock exchanges had last week questioned two foreign institutional investors - CS First Boston and Morgan Stanley - and some others like Ajay Kayan of C Mackertich in connection with the 177-point Sensex crash. Market sources also feel that the operations of all these top brokers are linked and some local institutions may also be involved.