The inquiry conducted by the regulator covered more than 20 locations and found a highly structured operation of over 22 accused entities. He is noted for his role in the securities market scam in 2000. Salgaocar allegedly used his excellent relationships with a leading fund house to fraudulently enrich the profits made through confidential trading information.

There was a scheme of deception as a coordinated mechanism.

Whole-time Member, Kamlesh Varshney, of SEBI stated the modus operandi in the order saying, “Rohit Salgaocar and Ketan Parekh created an intricate design to abuse NPI related to the Big Client by facilitating front-running operations. Notice No. 10, Ashok Kumar Poddar, had accepted that he was acting as a facilitator in the aforementioned unauthorized operations. Parekh and Poddar were prohibited from dealing in securities before.

The directive further mandates an immediate embargo on the trio—Salgaocar, Parekh, and Poddar—barring them from engaging in securities trading or associating with any SEBI-registered intermediaries.

The Anatomy of the Scam

During the investigation, it emerged that Salgaocar got access to trading strategies because he was a key contact of the big US-based fund house. Those details were transmitted to Parekh, who communicated them to other accomplices and they carried out trades based on the strategies before the move of the US-based fund house. Parekh’s accomplices, using such secret communication avenues as WhatsApp and phone calls, conducted trades aimed at anticipating and benefitting from market moves of the US-based fund house.

A shocking 90% of the Big Client’s trades were reportedly channeled through Parekh’s nexus. These transactions were systematically routed via accounts controlled by six identified front-runners, enabling the generation of significant illicit profits while evading regulatory scrutiny.

Innovative Mechanisms and Tactical Maneuvering

The novelty of the scam lies in its intricate web of information flow and execution. Parekh used his entrenched Kolkata-based network to front-run trades, operating under the regulatory radar. Salgaocar’s strategic positioning within the market allowed him to coordinate with various participants, including foreign and domestic funds, to orchestrate the trades seamlessly.

SEBI presented a diagrammatic presentation of the information flow chain that explained how Parekh was the nodal point of this intricate process. Trades were executed through various accounts so that the operation was not identifiable in terms of scale and would keep running till the intervention by SEBI.

A Continuing Legacy of Malfeasance

Ketan Parekh’s return to infamy shows that he can still play around with the financial system. While his previous offenses got him a 14-year ban from the markets, his knack for exploiting the weaknesses in the securities ecosystem has become a warning to regulators and market participants.

As SEBI continues its drive, the fact-finding into this case puts across the significance of effective surveillance and rigorous enforcement in preserving market integrity.

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Speaking about the Indian bond market, Madhabi Puri Buch, the chairperson of Sebi, suggested that Akshay Kumar might play a key role in it. Madhabi Puri Buch discussed her goals for the Indian bond market at the Rising Bharat Summit, cracking jokes about an Indian James Bond to herald the bond market’s triumph. For this, who did she choose? Kumar Akshay.

She stated, “When we think of the markets, we all invariably think of the share market,” pointing to a slide in her presentation that had several actors who have portrayed James Bond throughout the years. On the other hand, our bond market is thriving. People are unaware of this.

“The bond market offers corporate India ₹60 for every ₹100 that the banking system lends it. The majority of people are unaware of how high that figure is. We anticipate this to expand far more,” she remarked.

Nevertheless, she noted that a significant level of foreign interest in GoI securities is anticipated given the inclusion of GoI securities in global indices, stating that “Once the GoI yield curve is established, investors automatically tend to come into our corporate bond market as well because you just benchmark off the GoI yield and then add the credit spread.”

She continued, “We should see a good amount of inflow in the Indian bond market and, as people tell me, now we will need to have an Indian hero there (in the PowerPoint slide showing different James Bonds) and I said we will put Akshay Kumar there in the same natty suit.”