Sebi levies Rs 37.6 lakh fine on 6 firms for fraudulent trading

Capital markets regulator Sebi has levied a total fine of Rs 37.6 lakh on five entities for executing reversal trade in the illiquid stock options segment on the BSE. Vinayaka Finlease Pvt Ltd, Hi-Tech Chemicals Pvt Ltd, Hi-Tech Heritage Ltd, Gradgrind Barter Pvt Ltd, Toplight Commercials Ltd, and Wrinkle Marketing Pvt Ltd are the firms facing a penalty.

Reversal trades are those trades in which an entity reverses its buy or sell a position in a contract with subsequent sell or buy position with the same counterparty during the same day. The reversal trades carried out by the entities were non-genuine trades as they were not executed in the normal course of trading, lacked basic trading rationale and led to a false and misleading appearance of trading and generated artificial volume, hence were deceptive and manipulative, Sebi said in similarly worded separate orders.

The orders come following a probe conducted by Sebi in the stock options segment from April 2014 to September 2015 after it observed a large scale reversal of trades that led to the creation of artificial volume. Sebi noted that the firms violated the provisions of the Prohibition of Fraudulent and Unfair Trade Practices norms.

Consequently, it imposed a fine of Rs 10.5 lakh on Gradgrind Barter, Rs 7.1 lakh on Toplight Commercials, while others are facing a fine of Rs 5 lakh each. If the firms fail to pay the fine amount within 45 days of the receipt of the order, recovery proceedings may be initiated for the realisation of the fine amount along with interest by attachment and sale of movable and immovable properties, it added.

Through a separate order, the regulator also imposed a fine of Rs 12 lakh on Shaswat Stock Brokers Pvt Ltd for not complying with various circulars of Sebi and stockbrokers' regulations. "The notice has grossly failed in performing its duties as a registered sub-broker and also failed to adhere to high standards of service by facilitating and indulging in fraudulent and unfair trade practices and thus acted against the integrity of the securities market," Sebi said while levying the fine.

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