Sebi levies fine on 8 entities for fraudulent trading

Markets regulator Sebi on Wednesday levied a total fine of Rs 40 lakh on eight entities for executing fraudulent trades in illiquid stock options on the BSE.

Upon observing large-scale reversal of trades in the stock options segment of the exchange, Sebi conducted a probe between April 2014 and September 2015.

Investigation revealed that over 81 per cent of all the trades executed in the segment involved reversal of buy and sell positions by the clients and counterparties in a contract which resulted into generation of artificial volumes.

The eight entities fined by the regulator were among the various entities that indulged in execution of reversal trades in the stock options segment of the bourse, the orders noted.

Reversal trades are those trades in which an entity reverses its buy or sell positions in a contract with subsequent sell or buy position with the same counter-party in the same day.

"The noticee, by engaging in such non-genuine transactions, created a misleading impression of trading in respective contracts while dealing in stock options contracts in a fraudulent manner," Sebi said in similarly worded orders.

By doing so, the entities have violated the provisions of the Prohibition of Fraudulent and Unfair Trade Practices norms, the orders noted.

Accordingly, a fine of Rs 5 lakh each has been slapped on Narnolia and Associates LLP, Om Kiran Ispat Udyog, Nihon Commodities Pvt Ltd, Merfin Consultants Pvt Ltd, Maruti Steel Moulding Pvt Ltd, Mansarovar Ferrous Pvt Ltd, Mahesh Nahata and DJM Securities Pvt Ltd.

Besides, through two separate orders, the regulator imposed a total fine of Rs 9 lakh on promoters of Duke Offshore Ltd for failing to make disclosures mandatory under market norms.

"Failure to make disclosure for the pledged shares as prescribed in Regulations at the time of creation and release of pledge and making wrong and incomplete disclosures on the part of the Noticee attracts the imposition of monetary penalty," Sebi said while levying fine of Rs 5 lakh on Komal Duke and Rs 4 lakh on Avik George Duke.

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