Harshad Mehta Scam
Harshad Mehta Scam
Harshad Mehta Scam
or
The BIG Bull SCAM
or
The Securities SCAM
Presented By:
Praveen Kumar
Zeeshan Ahmad
Siddhartha Panigrahi
Nayan Agarwal
Rekha Gupta
HARSHAD MEHTA
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
&
People Involve
What happened ?
By 1990 Harshad Mehta had risen to
prominence in the stock market. He had been
buying shares heavily. The shares which
attracted his attention were:
-Associated Cement Co. (ACC),
-Apollo Tyres,
- Reliance,
-Tata Iron and Steel Co. ( TISCO ),
-BPL,Sterlite,
-Videocon.
He took the price of ACC from 200 to 9000.
Thats an increase of 4400%!!!
Imaginary companies created
Bank Receipts
In a RF deal securities were not moved back
and forth in actuality
The borrower, i.e. the seller of securities,
gave the buyer of the securities a Bank
Receipt
Bank receipts serve three functions
The process of RF
Settlement Process
Payment of cheques
Dispensing of securities
Impact Of Scam On
Market
IMMEDIATE IMPACT:
The first impact of the scam was a steep fall in the
share prices. The index fell from 4500to 2500
representing a loss of Rs. 100,000 crores in market
capitalization. However, the major damage to the
stock market did not stop here. Since the accused
were active brokers in the stockmarkets, they had
traded a large number of shares during the previous
year. All these shares became tainted and worthless
and could not be used in the market. This was a
great loss to the innocent investor who had bought
these shares much before the scandal was exposed.
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
Corporate Governance is the value framework,
ethical framework and moral frameworkwithin
which businesses make decisions.
Business must harness the power of ethics
which is assuming a new level of importance
and power. (James Joseph - former US
ambassador to SA).
When large sums of money are involved, greed
causes people to become unethical. How