SEBI Penalises 21 Entities for Manipulating Share Price of Sunstar Realty Development
Moneylife Digital Team 02 November 2022
Market regulator Securities Exchange Board of India (SEBI) has slapped a penalty of Rs1.05 crore on 21 entities for manipulating the share price of Limited (SRDL). The regulator has imposed a penalty of Rs5 lakh each on these 21 entities and directed them to pay the amount within 45 days, SEBI said in its order passed on Monday. 
The 21 entities named in the order are Pragyan Realty, Arrowlink Enclave, Panchkoti Real Estate, Dhanaasha Devlopers, Khushnuma Infrastructure (now called Zippy Tradmart), Panchmadhu Projects, Arlm Chemicals, Roselife Residency, Shubham Barter, Casuarina Projects, Dasbhuja Realtors, Speedfast Residency, Sadhan Ghosh, Bithika Mandal, Romit Shaw, Biswanath Biswas, Prasenjit Mandal, Anita Sarda, Ajay Sarda, Ajay Malakar and Atish Jaiswal. 
SEBI conducted an investigation in the scrip of (SRDL) during June 2015 to March 2016 to ascertain whether there were any violations of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules. It found that these entities were involved in executing manipulative trades and carrying out trades with the connected parties. Through such acts, they contributed to decreasing the price of the scrip and also increase the volume substantially during the investigation period. 
It was observed that the trading during the investigation period increased about nine times when compared to pre-investigation period. Further as observed, 31 connected entitites traded among themselves and contributed to 73.37% of the total market volume which is substantial volume when compared to the total market volume. Also the connected entities had contributed more than 25.46% of the total market volume through synchronized trades. The connected entities contributed to Rs -261.85% i.e. 59.17% of the market negative LTP and Rs -186.25  i.e.  42.09%  of  the  market  negative  LTP  through  trades  amongst themselves.  
Further,  out  of  542  negative LTP trades  placed  by  the  connected entities, 166 trades were first trades which contributed to Rs -58.50 to the market negative LTP and further through trading amongst themselves they contributed Rs -57.95 to the negative LTP. Connected entities also contributed Rs-11.65 i.e. 47.75% to the market NLP. 
The 21 noticees who were part of this proceeding were amongst the 31 connected entities which traded during the investigation period and contributed to negative  LTP  and  first  trades. In  the  case  of  rest  of  nine  entities, administrative warning was issued.
In the normal course of trading, an investors tend to sell at a higher price and buy at a lower price. In the instant case, the trades of the connected entities who placed 91.32% of the buy trades and 79.37% of the sell trades, led to  deflating  the price  of  the  scrip  of SRDL. The  said  trading  was  not  a  normal trading behavior as to why a seller would place sell orders below the prevailing market prices which were matched by subsequent buy orders by the connected entities.  Further connected  entities  also  placed  166  first  trades  out  of  542 negative  trades  which  further  substantiates  that  the  trading  behavior  of  the connected  entities  was  not  genuine. The  trading  pattern of  the  noticees also brings out nexus/connection among themselves.
It was also noted by SEBI that  four connected entities  were  struck  off  and since the  directors were responsible  for  the  activities and  day  to  day  management of  the  company including  trades  in  the  scrip  of  SRDL,  the  directors  were  allegedly  held responsible for the alleged non-genuine trading in the scrip of SRDL.
In her order, SEBI adjudicating officer Barnali Mukherjee said these 21 entities were not acting as genuine traders and had no bona fide intention to trade in the scrip of SRDL after finding sufficient evidence based on peculiar trading pattern and the unusual manner and frequency with which trades were executed by the 21 noticees.
 "I therefore hold that the trading behavior of noticee no. 1 to 21 vis-a-vis the scrip of SRDL has been ill motivated, fraudulent and was motivated towards manipulating the price of the shares of SRDL as well as to create artificial trading volume in the scrip of the SRDL. Such a trading behaviour is definitely in violation of ...of PFUTP Regulations," she added.
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