Capital markets regulator Sebi on Thursday imposed a penalty totalling Rs 45 lakh on nine entities, including individuals, for indulging in non-genuine trades in illiquid stock options at BSE.
In nine separate orders, the regulator has levied a fine of Rs 5 lakh each on Armour Commotrade, Seema Aggarwal, Seema Bagree, Seema Choraria, Kala Patodia, Mandeep Kaur, Kalpana Aggarwal, Ankit Modi and Sarita Gupta.
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 led 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.
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 observed that these nine entities were among the various entities which indulged in the execution of reversal trades in the stock options segment of BSE.
According to Sebi, trades by these entities were non-genuine in nature and created a misleading appearance of trading.
By indulging in such trades, they violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms, Sebi said in its orders. In a separate order, the regulator has levied a fine of Rs 2 lakh on Sterling International Enterprises for indulging in the fraudulent trading practice.
"There is not an iota of doubt that noticee (Sterling International Enterprises) was part of the scheme wherein entities connected to the noticee created artificial volumes in its scrip by indulging in circular trades, synchronized trades and trading among themselves during the investigation period," Sebi said in an order.
Through such an act, it flouted the provision of PFUTP rules. The regulator had carried out an investigation in respect of irregular trading activities of certain entities in the scrip of Sterling International Enterprises during the period May 2008 to September 2009.
