Sebi admits to official's collusion in Pyramid Saimira case

Is Sebi officials' collusion with stock manipulators rampant? Seems so.

In reply to a parliament question by MP Rajeev Chandrashekar, Minister of State for Finance Namo Narian Meena gave three instances where Sebi officials were investigated for irregularity, corruption and bribery, a report in Moneylife said.

The revelation comes at a time when the present chairman of Sebi is devising ways to curb such manipulations.

One of the cases mentioned by the minister was the more than three-year-old Pyramid Saimira open offer case, where the company received a forged letter purportedly from Sebi asking it to make an open offer at a price that was astronomically higher than the prevailing market price, the Moneylife report said.

The official, being investigated and under suspension from 15 April 2011, is Jerome K Alexander, a manager, the report said.

The case is as follows. In December 2008, Pyramid Saimira Chairman PS Saminathan received a letter from Sebi which wanted him to make an open offer for a 20 percent of the company's shares with in 14 days.

The price had to be Rs 250 a share, sharply higher than the market price of Rs 70.

The open offer followed Saminthan's decision to acquire 25 percent stake held by two co-promoters, one of whom was Nirmal Kotecha, a stockbroker. The Sebi letter was leaked to DNA and Business Standard, in a bid to rig prices of Pyramid Saimira shares.

Later, it was found that the letter was forged, and sent with the intention of rigging share prices.

The official, being investigated and under suspension from 15 April 2011, is Jerome K Alexander, a manager.

A shoddy investigation into the matter resulted in the winding up of a profitable Pyramid Saimira, causing losses to its shareholders and employees.

"On the other hand, Nirmal Kotecha, a notorious speculator and a self-confessed admirer of the late scamster Harshad Mehta, is still scot free, while the involvement of its (Sebi's) own officials has been kept suppressed until today," the report said.

UK Sinha, the present Sebi chief, has been vocal about controlling insider trading and stock manipulation. He has sought power to tap phones to effectively curb manipulation.

"If the regulator cannot act against its own, when caught in a flagrant act of corrupt collusion with a market operator, can we trust it to act impartially when it has the power to tap phones at will?" the article asks.

Read the full article here.