Sebi slaps Rs 30 lakh penalty on 6 entities in illiquid stock options case

Capital markets regulator Sebi has imposed a penalty of Rs 30 lakh on six entities, including individuals, for indulging in non-genuine trades in illiquid stock options at BSE.

In six separate orders, the regulator levied a fine of Rs 5 lakh each on Sudhir Kumar Gupta HUF, Ankit Kumar Bihani, Sourabh Agarwal HUF, Sangita Nilesh Kothari, Suraj Mal Manoj Kumar HUF and Manoj Agarwal.

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 lead 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 trades.

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 stock options segment of BSE.

It was observed that these six entities were among the various entities which indulged in execution of reversal trades in 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 passed on Thursday and Friday.

In two separate orders on Friday, the regulator levied a fine of Rs 1 lakh each on Deepak Kumar and D Arun Kumar for violating insider trading rules in the matter of Titan Company Ltd.

The two persons, who were employees of Titan at the time of violation, had traded in the company's shares during April-September 2018 on few occasions and total value traded by each of them was in excess of Rs 10 lakh.

They were required to make disclosures to Titan, for each of the transactions within two working days under the rules. However, they failed to make the disclosures.

Through a separate order, Sebi imposed a penalty of Rs 2 lakh Mavjibhai Dudhagara and Prafulaben Ashokbhai Dudhagara for disclosure lapses in the case of Angel Fibers Ltd.

''Noticees failed to make timely disclosures regarding the creation of pledge of shares held by them, to the Target company (Angel Fibers Ltd) and the exchange (BSE) and thereby have violated .... SAST Regulations,'' Sebi said.

The regulator had conducted an examination of a draft letter of offer in the matter of Angel Fibers submitted by the merchant banker Beeline Broking.

The examination was to ascertain whether there was any violation of the provisions of Sebi (Substantial Acquisition of Shares and Takeover) Regulations by certain entities of the company for the period financial year 2017-18 and 2018-19.