Market regulator, Securities and Exchange Board of India (SEBI) has imposed a penalty totaling Rs1.56 crore on 36 entities involved in manipulative trading practices related to illiquid NIFTY index option contracts. This penalty was issued following a comprehensive 330-page order that meticulously details each transaction among the entities
In an order last week, Amar Navlani, adjudicating officer (AO) of SEBI, says, "I note that each of the notice 1 to 29, entered into synchronised and squared off trades with Nirshilp Securities Pvt Ltd (currently known as Nirshilp Commodities and Trading Pvt Ltd) wherein notice 1 to 11 and Nirshilp Securities also carried out self-trades. Further, having regard to the facts and circumstances of the instant matter, the nature of violations involved, wherein Nirshilp Securities booked losses and each of noticee 1 to 29 booked profit separately, and that certain of the noticee as brought out are repeat offenders, in my view, the request of noticee in this regard are devoid of merit and hence cannot be accepted."
The entities involved in the trading activities in the index options contracts of Nifty are: Rajendra D. Shah (noticee 1), Harendra D Shah (noticee 2),Dhaval R Shah (noticee 3),Shailesh D Shah(noticee 4), Shilpa R Shah (noticee 5), H D Shah(HUF)(noticee 6),P D Shah(HUF)(noticee 7),R D Shah (HUF)(noticee 8), Vaipan Securities Pvt Ltd (noticee 9), S D Shah (HUF)(noticee 10), Pankaj D Shah (noticee 11),Chintan P Shah (HUF) (noticee 12), Kamal P Shah (HUF)(noticee 13), Hetal C Shah(noticee 14), Pranlal B Shah(HUF)(noticee 15), Neha K Shah(noticee 16), Hemang D Sheth(noticee 17), Rasilaben P Shah (noticee 18),Chandrika Dharmendra Gada (noticee 19), Vaibhav Nagji Rita (noticee 20), Punaiben Manilal Gada (noticee 21), Neha Pravin Gada (noticee 22)and Gomtiben Thakarshi Gada (noticee 23).
Additionally, the order includes Shapoor P Mistry (ARB) (noticee 24), Modisons Commercial Pvt Ltd (noticee 25), Nikita N Shah (noticee 26), A V Commodities (notice 27),Commodities V D(noticee 28), Amrutbhai Nathabhai Darji (noticee 29), Nirshilp Securities Pvt Ltd (formerly Nirshilp Commodities and Trading Private Limited) (noticee 30), Jambuwala Capital Services Pvt Ltd (noticee 31), Inventure Growth & Securities Ltd (noticee 32), Nirpan Securities Pvt Ltd. (noticee 33), Dolat Capital Market Pvt Ltd(noticee 34), Vaibhav Stock and Derivatives Broking Pvt Ltd(noticee 35), and Keshav Securities Pvt Ltd (noticee 36).
SEBI order revealed the noticees 1 to 30 engaged in synchronised trading in 691 contracts during the investigation period. The strategy involved Nirshilp Securities consistently incurring losses, while the other 29 noticees recorded profits by offsetting their trades. SEBI observed that these transactions were executed in a manner that created a misleading appearance of active trading in NIFTY options contracts.
SEBI's analysis of the trading behaviour of Nirshilp Securities revealed a pattern of precise order placements on both the buy and sell sides, with orders timed closely and prices carefully aligned. This pattern suggested abnormal trading behaviour, indicative of self-trading aimed at creating a false impression of market activity.
In relation to Noticees 31 to 36, who are stockbrokers, SEBI found that these brokers played a role in facilitating the non-genuine trades executed by the other noticees. SEBI emphasised that stock brokers are expected to maintain high standards of integrity, fairness, and diligence in their operations. They are required to exercise due skill and care and must not engage in manipulative, fraudulent, or deceptive practices that could create a false market, either individually or in collusion with others.
SEBI concluded that Noticees 31 to 36 breached these standards by aiding and abetting the manipulative trades conducted by Noticees 1 to 30. Consequently, SEBI determined that Noticees 1 to 36 violated the provisions of the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations. Additionally, Noticees 31 to 36 were found in violation of the Code of Conduct outlined in the Stock Brokers Regulations.
Nirshilp Securities Pvt Ltd has been penalised Rs21 lakh, Inventure Growth & Securities Limited faces a fine of Rs9 lakh, and Nirpan Securities Pvt Ltd is required to pay Rs7 lakh. Additionally, Rajendra Shah, Harendra D Shah, Dhaval R Shah, Vaipan Securities Pvt Ltd., Shilpa R Shah, Jambuwala Capital Services Pvt Ltd, Dolat Capital Market Pvt Ltd., Vaibhav Stock and Derivatives Broking Pvt Ltd and Keshav Securities Pvt Ltd each face penalties of Rs6 lakh.
Chintan P Shah (HUF), Kamal P. Shah (HUF), Hetal C Shah, Pranlal B Shah, Neha K Shah, Hemang D Sheth, Rasilaben P Shah, Modisons Commercial Pvt Ltd, Nikita N Shah and A V Commodities are each fined Rs5 lakh. Shailesh D. Shah, H D Shah (HUF), P D Shah (HUF), R D Shah (HUF), S D Shah (HUF) and Pankaj D Shah are each penalised Rs1.20 lakh, while Chandrika Dharmendra Gada, Vaibhav Nagji Rita, Punaiben Manilal Gada, Neha Pravin Gada, Gomtiben Thakarshi Gada, Shapoor P. Mistry (ARB), Commodities V D, and Amrutbhai Nathabhai Darji are each fined Rs1 lakh.
