Sebi fines 4 entities for inauthentic transactions in illiquid stock options
Capital markets regulator Sebi has imposed a total fine of Rs 29 lakh on four entities for fraudulent and manipulative transactions in the illiquid stock options segment on BSE.
The regulator observed that such a large-scale reversal of trading in stock options has led to the creation of an artificial volume at BSE.
Thus, the Securities and Exchange Board of India (Sebi) conducted an investigation from April 2014 to September 2015 and found that 81.38% of transactions executed on stock options were not genuine, this which led to the creation of an artificial volume.
The regulator noted that the four entities were among those that executed trade reversals.
These trades were not genuine in nature and created a false or deceptive appearance of trading in terms of artificial volumes of stock options and therefore were manipulative and deceptive.
The fraudulent transactions conducted by the entities violate the provisions of the Prohibition of Fraudulent and Unfair Business Practices (PFUTP) standards, Sebi said in separate orders.
Therefore, a fine of Rs 5 lakh was imposed on York Financial Services Pvt Ltd, Rs 16.5 lakh on Radha Mohan Purshottam Das Jewels Pvt Ltd, Rs 6 lakh each on AHK Developers Pvt Ltd and Kewal Chand Jain.
In addition, the regulator imposed a total fine of Rs 20 lakh on Nirmal Kotecha in a case related to fraudulent and manipulative transactions in the shares of Pyramid Saimira Theater Ltd.
Sebi discovered that, according to media reports released in December 2008, the regulator asked one of the promoters of the Pyramid Saimira Theater, PS Saminathan, to make an open bid for an additional 20 percent stake.
This led to an increase in Pyramid’s share price on December 22, 2008.
However, the company told the exchanges that it had not received any communication from Sebi.
The next day, Saminathan told the exchanges that he had received the purported letter from the regulator. But Sebi, through a press release, clarified that no such letter had been issued by him.
Sebi also filed an FIR regarding the forgery of Sebi’s letter.
Later, Sebi’s investigations revealed that a forgery was committed to manipulate the company’s stock price and that Nirmal Kotecha, one of the promoters and the main shareholder at the time, was the one of the main beneficiaries of the manipulation and seemed to have orchestrated the forgery.
Several entities were involved in the manipulation of Pyramid’s actions and were associated with Nirmal Kotecha. Kotecha also failed to meet disclosure requirements.
Through three separate orders, Sebi said Rajesh Jani, Nitin Goradia and Nikhil Securities face a total fine of Rs 7 lakh for their respective roles in the fraud scheme.
Pursuant to a separate order, Sebi imposed a fine of Rs 10 lakh on 7 entities which are to be paid jointly and severally by them in a case relating to the fraudulent trading of shares of PMC Fincorp Ltd.
The seven entities helped certain other entities to manipulate the price of the script by providing liquidity and being counterparties to their transactions.
The entities are – JMS Financial Services, Mindex Capital Market (formerly MKN Equity Brokers Pvt Ltd), MKN Commodity Brokers, SK Aggarwal HUF, MK Aggarwal HUF, KK Aggarwal HUF and Nitin Aggarwal HUF.
The entities were penalized for their role in manipulating PMC Fincorp’s share price, thereby violating the PFUTP rule.
(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)