Jan. 6: Sebi is probing whether the stock brokers have collected the income proof document of Shivraj Puri, the prime accused in the Rs 300 crore Citibank fraud. This proof is a mandatory requirement for trade in the derivatives market.
The market regulator had made it mandatory in Dece-mber 2009 for the brokerage firms to collect income proof documents from all their clients before allowing them to trade in the derivatives segment of the market.
The preliminary investigations into the alleged fraud committed by Shivraj Puri, a senior employee at a Citibank branch in Gurgaon, has found that he diverted his clients’ money into the derivatives market.
Investigative teams from Sebi have already more than once questioned Puri as well as other parties connected to the fraud.
As per the preliminary probe, Sebi has found lapses on part of the brokerage firms in collecting all the required financial documents from Puri and others through whose accounts he invested in the stock market, a senior official said.
The brokers have been asked by Sebi to furnish all the documents that they had collected from Puri, subsequent to which the market regulator would check their veracity.
Most of these funds were invested into Nifty options — a derivative product with the market benchmark index the Nifty as underlying security, where the investor has no obligation to take the delivery and needs to pay only margin money.
In this derivative, investors bet on upward or downward move of the Nifty and returns depend on accuracy of such bets.
As the derivatives trade involve large-scale transactions, there are greater chances of black money or money earned through dubious means finding their way to the stock market through derivatives, a senior official said. This was the reason behind Sebi making it mandatory for all the brokerage firms to allow their clients to trade in the derivatives only after submission of valid income proof. In cases of discrepancies or the income profile not matching with the investment portfolio, the brokers are supposed to inform the regulator.