Ketan_Parekh_Scam_SEBI_Presentation.pptx

Financial Scam and SEBI's role in investor protection

1. Case Study: Ketan Parekh Scam & SEBI’s Role in Investor Protection Analyzing the Impact and Regulatory Response

2. Introduction Overview of financial scams in India India has witnessed several financial scams that have shaken investor confidence and exposed loopholes in the financial system. Some major scams include: Harshad Mehta Scam (1992): Stock market manipulation using bank receipts. Ketan Parekh Scam (2001): Price rigging through circular trading. Satyam Scam (2009): Corporate financial fraud and misrepresentation. NSE Co-location Scam (2015): Algorithmic trading malpractice.

3. Importance of Investor Protection & SEBI’s Role Investor protection is crucial to maintain confidence in financial markets and prevent fraud. The Securities and Exchange Board of India (SEBI) plays a key role in: Regulating stock exchanges and market participants. Investigating fraudulent activities and penalizing violators. Strengthening corporate governance and transparency. Implementing new rules and surveillance mechanisms post-scandals.

4. Ketan Parekh Scam (2001) Ketan Parekh, a stockbroker, manipulated stock prices through circular trading using borrowed funds. He focused on a select group of stocks, known as K-10 stocks , artificially inflating their prices. The scam led to massive stock market losses, and SEBI intervened with trading restrictions, penalties, and regulatory reforms to prevent future fraud.

5. Stock Price Impact During the Scam

6. Impact on Investors & Market - Investors suffered huge losses as stocks crashed - Market volatility increased due to speculative trading - Decline in trust towards brokers and stock analysts

7. SEBI’s Intervention & Actions - Investigated fraudulent trading activities - Imposed trading restrictions on Ketan Parekh - Strengthened stock market surveillance to detect circular trading - Penalized involved entities and tightened banking regulations

8. Regulatory Changes After the Scam - Increased monitoring of broker transactions - Stricter margin trading and risk management norms - Implementation of advanced stock surveillance systems - Enhanced disclosure requirements for market participants

9. Investor Protection After SEBI’s Actions - Improved transparency in stock trading - Strengthened corporate governance norms - Reduced manipulation through stricter trading regulations - Increased investor awareness and education programs

10. Case Study Summary Aspect Details Scandal Type Stock price manipulation through circular trading Impact Stock market volatility, investor losses, banking crisis SEBI’s Response Regulatory reforms, stricter surveillance, penalties imposed

11. Conclusion - Ketan Parekh Scam highlighted stock market loopholes - SEBI’s intervention helped regulate market operations - Strengthened investor protection through reforms - Need for continuous monitoring to prevent future scams

12. References - SEBI Reports on Market Reforms - News Articles (Economic Times, Business Standard) - Company Statements & Regulatory Filings