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Sebi finds fault with JM Morgan Stanley

Savio G Pinto

The Securities and Exchange Board of India report on the stock market scam has indicted JM Morgan Stanley Securities Pvt Ltd, stating that a limited review of the trading member shows instances of transactions which appear to be of a manipulative nature which could have impacted the decline in certain scrip prices.

However, the report states that it would require a detailed analysis of the entire trading by the member over an extended period.

Sebi claims that since a large portion of trading by the member was on account of institutional clients, particularly foreign institutional investors, its enquiries were hampered since it was not possible to go into the reasons and nature of their trading.

It also states that "trading by clients is sometimes influenced by a large plethora of research reports released by the member, which are company specific or general in nature. To go into the recommendations contained in the research reports and their impact upon general trading sentiment would require an exhaustive analysis."

JM Morgan Stanley Securities Pvt Ltd is a trading member of the Bombay Stock Exchange and the National Stock Exchange.

The dominant promoter of the trading member is Morgan Stanley India Securities.

Trading by the member at both the BSE and NSE was examined in certain scrips for specified dates and according to the report "there are indications that trading by the member at both the BSE and NSE impacted the prices of certain scrips which formed part of the stock indices or otherwise impacted trading sentiment."

The report states that the member sold 39,047 shares of Infosys Technologies on March 1 when the scrip price fell by Rs 350 ( i.e. from 6100 to 5750) of which the member sold 19,296 shares during the time slot 1346 - 1431 IST.

Similarly the member sold 5,00,000 shares of Satyam Computers on March 1 including 3,58,087 shares on behalf of the Government of Singapore Investment Corporation and 1,10,000 shares for Fortis Investment (Asia) Ltd. Of these 1,50,000 shares were sold during the time slot 1501 -1545 IST, when the scrip price fell by Rs 18. (i.e. from Rs 318-Rs 300) ."

The report also states that " the immediately succeeding trade after execution of the members order was at a higher rate, which shows that the member swept away the bid side of the order book. It prima facie appears that the member may have influenced in bringing the price down."

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