2. Introduction on
Corporate Frauds OR
White Collar Crimes
White Collar Frauds refers
to financially motivated non-
violent crime committed by
business and government
professionals.
Fraud is a worldwide
phenomenon that affects all
contiments and all sectors of
the economy.
According to ACFE, Fraud
is “A deception or
misrepresentation that an
individual or entity makes
knowing that
misrepresentation could
result in some unauthorised
benefit to the individual or to
the entity or some other
party.”
There are many types of Frauds,
including the following
common frauds:
Theft of cash
Misuse of acconts
Bribery and corruption
Financial accounting mis-statements.
3. Objectives of the Study
1.
• To highlight the Ketan Parekh Scam
portraying the sequence of events the key
parties involved, and major follow-up actions
under taken in India.
2.
• What lessons can be learned from Ketan
Parekh scam?
4. National – International
Comparison
On the basis of types of Frauds
held in Indian & Global Companies
On the basis of Frauds committed by
internal & external factors of
Companies
5. THE KETAN
PAREKH SCAM A Mumbai based stock broker
chartered accountant by profession
KP took advantage of low liquidity
in certain stocks which later came
to be known as ‘K-10’ Stocks
Held significant stakes in the K-10
companies
The buoyant stock markets from
January to July 1999 helped the
K-10 stocks increase in value
substantially
As a result other brokers and fund
mangers started investing heavily
in these stocks
6. THE K-10
STOCKS
Aftek
Infosys
DSQ software
Global telesystems
Himachal Futuristic
Communications
Pentamedia Graphics
Satyam computers
SSI
Zee Telefilms
Pritish Nandy
Communications
All my lifetime's savings are gone. I
don't know how to feed my
family."
- A small investor hit by the Ketan
Parekh scam, in April 2001.
7. Impact on Stock Market
2001: The Market fell by 28% in 2 months
(Feb – Apr) as the Scam came into light.
8. The Crash that Shook the Nation
176 points fall in the sensex on
march 1st, 2001.
Prior day union budget tabled
prompted 177 sensex points
increase.
SEBI launched immediate
investigations.
SEBI inspected the books of
several brokers suspected of
triggering the crash.
RBI ordered some banks to
furnish data of Capital market
exposure.
BSE President Anand Rathi’s
resignation added to continued
downfall of sensex.
Opened debate over banks
financial capital market
operations, Lending funds
against collateral security, Dual
control of co-operative banks
Ketan Parekh was arrested by
CBI on 30th March 2001. He
was charged befrauding Bank
of India by almost $20 Million
Another sensex fall of 147
Points
10. Factors that helped the
man
• Formed a network of brokers
• Identified and targeted 10 stocks
• When stock prices were high, they were pledged
with banks as collateral
• No problems as long prices were rising
• Pay order fraud
• Issued cheques to MMCB drawn on BOI
• Went to BOI, SBI, and PNB and got pay orders
discounted
11. SEBI’s
role
after
the
scam
An additional 10% deposit margin was
imposed on outstanding net sales in the
stock markets.
It suspended all the broker member
directors of BSE’S governing board.
SEBI also banned trading by all stock
exchange presidents, vice presidents
and treasurers.
SEBI allowed banks for collateralised
lending only through BSE and NSE.
12. Conclusions
• Rs. 2000 Billion lost.
• KP is banned from stock market trading till 2017.
• All KP had to say was “I Made Mistakes.”
• The Retail Investors were the worse hit.
• SBI, BOI, PNB, MMBC had to suffer huge losses.
13. Re-designing business
practices to reduce the
risk of future financial
fraud.
Keep account
information secure.
Don't tell anyone else
your password,
recovery questions, or
email address.
