``The next phase of SEBI's investigation would concentrate on the role of these company managements to artificially boost the scrip prices,'' said a SEBI official. There were allegations that the promoters/management of some of the companies were hand-in-glove with brokers in the price-rigging exercise which rocked the markets last year.

In the first phase of the investigation, the SEBI had focussed on the price manipulation by brokers and debarred 18 stock-broking firms from trading. The regulator, in the second phase of the probe, had issued show-cause notices to the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

SEBI had on February 10 issued show cause notices to BSE president JCParekh, former vice-president Rajendra Banthia and executive director RC Mathur as well as the NSE demanding why action should not be taken against them for their inability to detect price manipulation in the BPL, Videocon International and Sterlite Industries stocks in May last year. The notices served point to specific lapses in detecting the price and volume abnormalities in these three scrips.

Both the BSE and the NSE are examining various technical and legal aspects of the SEBI's notice. "We are looking at the show cause notice and it will take some time to reply," BSE president J C Parekh said. Besides Parekh, SEBI has slapped show-cause notices on former vice-president Rajendra Banthia and executive director R C Mathur.

``We have received a show-cause notice from SEBI and we are at present working on the reply to be sent to them,'' said an official of the NSE.

Top SEBI sources said that the show-cause notices were issued after the performance of these exchanges was reviewed. "It was found thateven though the systemic errors both in the BSE and the NSE had been removed in the last six months, on the surveillance side all exchanges had problems which had led to price-rigging," said a SEBI source.

``On the BSE, the `all or none' segment was misused while on the NSE the `minimum lot segment' was misused. On the BSE, the Kapli system was misused when certain brokers had exceeded the gross exposure limit on the BSE and no action was taken against them. Only a small fine was levied in some cases which amounted to either a failure on the judgemental part or the surveillance mechanism,'' said a SEBI source.