Sebi slaps Rs 40 lakh fine on 8 entities in illiquid stock options case

Capital markets regulator Sebi on Monday imposed a Rs 40 lakh penalty on eight entities, including individuals, for indulging in non-genuine trades in illiquid stock options at BSE.

In eight separate orders, the regulator has levied a fine of Rs 5 lakh each on Aadarshini Trading Company, Nimesh Doshi HUF, Shweta Garodia, Shubhi Bansal, Rajesh Jajoo, Neha Rathi, Neha Maloo and Shiva Polytubes.

The Securities and Exchange Board of India (Sebi) observed a large scale reversal of trades in the stock options segment of BSE. It noted that such a large scale reversal of trades in stock options lead to the creation of artificial volume at BSE.

In view of the same, the regulator conducted an investigation into the trading activities of certain entities in illiquid stock options at BSE for the period April 2014 to September 2015.

Pursuant to the investigation, it was observed that over 2.91 lakh trades comprising a substantial 81.38 per cent of all the trades executed in the stock options segment of BSE during the investigation period were non-genuine trades.

The non-genuine trades resulted in the creation of artificial volume to the tune of 826.21 crore units or 54.68 per cent of the total market volume in the stock options segment of BSE.

It was found that these eight entities were among the various entities that indulged in the execution of reversal trades in the stock options segment of BSE.

According to Sebi, these entities were instrumental in the creation of artificial volume in the illiquid stock option contracts at BSE during the investigation period by executing reversal or non-genuine transactions in the illiquid stock options segment at the exchange.

By indulging in such trades, they violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms, Sebi said.

In a separate order, the regulator levied a fine of Rs 10 lakh on Gulab Chand Agrawal and Rs 5 lakh on Ashok Dal & Oil Mills for violating the code of conduct prescribed under the insider trading norms in the matter of Sanwaria Consumer (earlier known as Sanwaria Agro Oils).

Through a separate order, Sebi has fined Rs 2 lakh on six entities for failing to make disclosures in the correct format within the stipulated timeline as required under SAST (Substantial Acquisition of Shares and Takeover) Regulations in the matter of Perfect Octave Media Projects Ltd.

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