Sebi fines 2 entities Rs 10 lakh for fraudulent trading in BSE stock options segment

Markets regulator Sebi Tuesday imposed a total penalty of Rs 10 lakh on two entities for carrying out fraudulent trades in the illiquid stock options segment on the BSE. Shri Parasram Holdings Pvt Ltd and Shivam Securities Pvt Ltd are the two companies facing penalties.

The orders follow an investigation initiated by the regulator between April 2014 and September 2015 after observing that the majority of volume generated in BSE's stock options segment was artificial volume created by execution of reversal trades. Pursuant to the investigation, it was found that the firms were among the several entities which indulged in the execution of reversal trades in bourse's stock options segment, Sebi said in two separate orders.

Sebi noted that the reversal trades carried out by the firms are non-genuine trades as they were not executed in the normal course of trading, lacked basic trading rationale and led to a false or misleading appearance of trading in terms of generation of artificial volume, and hence are deceptive and manipulative. "The scheme, plan, device and artifice employed by the Noticee in this case of executing reversal trades in illiquid stock options contracts at such varying prices, tantamount to fraud on the securities market in as much as it involves non-genuine/manipulative transactions in securities and misuse of the securities market," Sebi said in two similarly worded, but separate orders.

The acts of Shri Parasram Holdings Pvt Ltd and Shivam Securities Pvt Ltd are in violation of provisions of Prohibition of Fraudulent and Unfair Trading Practices (PFUTP) Regulations. Accordingly, a fine of Rs 5 lakh each has been levied on the two entities, it said.

In a separate order, the regulator imposed a penalty of Rs 5 lakh on Kelvin Fincap Ltd for failing to maintain share registry work at a single point. Kelvin Fincap, formerly known as Dahyabhai Sons Ltd, thus violated Depositories and Participant Regulations, Sebi said.