Markets regulator Sebi today imposed a total penalty of over Rs 2.62 crore on 11 entities for alleged involvement in fraudulent trading in the shares of four companies.
As many as ten entities were found to have indulged in synchronised trading with respect to shares of Nakoda Textiles India, Gayatri Projects, Nandan Exim and Trimurthi Drugs and Pharmaceuticals.
The 10 entities—Dhirajbhai V. Sanghvi HUF, Rameshbhai Vanghjibhai Shah, Vishnu Enterprise, Sagar Sanghvi, Ashik Sanghvi, Sajjankumar Nanwal, Sunitadevi Nanwal, Govindkumar Varma, Babubhai Desai and Sanghvi Fincap—have been slapped with a total fine of Rs 2,57,60,000.
Synchronised trading refers to a practice where the seller and buyer may have an understanding between them on trading of specific shares.
Besides, the regulator has fined MTL Share and Stock Brokers Rs 5 lakh for executing manipulative trades in the shares of the four firms on behalf of the 10 entities and violating stock broker norms.
The fresh ruling comes after the Securities Appellate Tribunal (SAT) set aside an earlier order of the Securities and Exchange Board of India (Sebi) and asked the regulator to look into the matter afresh.
Sebi had carried out a probe into the trading activity of the 10 entities in the shares of the firms for the period from July 2009 to January 2010 and it was revealed that the entities, who had traded significantly in the scrips of the firms, were connected to each other.
In a 40-page order, Sebi noted that the entities had indulged in synchronised trades among themselves between July 2009 and January 2010 for total volume of 25.27 lakh, 1.22 lakh, 6.78 lakh and 3 lakh shares constituting 11.21, 0.14, 4.23 and 3.25 per cent of the market volume in the scrips of Nakoda Textiles India, Nandan Exim and Trimurthi Drugs and Pharmaceuticals and Gayatri Projects, respectively.
The regulator said that by indulging in the manipulative trades, the entities not only created artificial volumes in the four scrips but also gave a misleading appearance of trading in the scrips.
"The 10 noticees (entities), being related / connected with one another, had traded in the said four scrips in a manipulative manner i.e. synchronised trading and thereby, have violated the provisions of... PFUTP (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations," Sebi said.
The regulator also noted that Dhirajlal V Sanghvi HUF, Ashik D Sanghvi, Vishu Enterprise and Rameshbhai Vanghjibhai Shah had indulged in self trades in the shares of the four firms.
Sebi said that Dhirajlal V Sanghvi HUF, Ashik D Sanghvi, Vishu Enterprise and Rameshbhai Vanghjibhai Shah, by indulging in manipulative trades such as self trades, have created artificial volumes in the four scrips, thereby, violating PFUTP Regulations.
According to the Sebi order, Rameshbhai Vanghjibhai Shah, Dhirajlal V Sanghvi HUF and Vishu Enterprise by putting in buy orders at rates higher than the last traded price (LTP) for intraday trades and higher than previous close price for first trades, had influenced the price of the four scrips.
On account of these activities, Rameshbhai Vanghjibhai Shah, Dhirajlal V Sanghvi HUF and Vishu Enterprise have violated the provisions of the PFUTP Regulations.
The regulator said that MTL, by executing manipulative trades in the four scrips on behalf of its client, has shown "lack of due care and caution" and violated provisions of the Broker Regulations.
