Market regulator Securities and Exchange Board of India (SEBI) has imposed penalties of ₹40 lakh on four entities found guilty of engaging in non-genuine trading activities within the illiquid stock options segment of the BSE. Each implicated entity has been fined ₹5 lakh for participating in these fraudulent activities.
The entities penalised include: Ramkrishna Karmakar, Upendra Tarachand Mahadule , Ram Gopal Gupta HUF, Pragnesh Bhupendrabhai Thakkar, Parasnath Buildwell Pvt Ltd, Usha Awasthi, B S Aggarwal and Sons HUF and Devendra Pareek HUF.
In eight separate orders, Jai Sebastian and Amit Kapoor, adjudicating officer (AO) of SEBI, articulated that the trading behaviour of these eight entities confirmed that such trades were not normal, indicating that the trades executed by the noticees were not genuine trades and being non-genuine, created an appearance of artificial trading volumes in respective contracts in violation of Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations, 2003.
SEBI investigated these trading activities, which spanned April 2014 to September 2015. It discovered that a staggering 291,744 trades, accounting for about 81.40% of all trades executed in the stock options segment, were potentially non-genuine. This alarming statistic underscores how these activities distorted the market by creating artificial volumes.
SEBI also mentioned that such trades were alleged to be non-genuine and created a false or misleading appearance of trading in terms of artificial volumes in stock options and, therefore, were alleged to be manipulative and deceptive.
The implicated entities executed trades characterised by reversal trades which, typically involve buying and selling the same securities almost simultaneously to create an illusion of heightened trading activity, the market regulator says, adding, "Such practices not only mislead other market participants but also undermine the fairness and transparency of the trading environment."
Specifically, SEBI says individuals involved executed varying numbers of trades, with Ramkrishna Karmakar , Upendra Tarachand Mahadule, Ram Gopal Gupta HUF, Pragnesh Bhupendrabhai Thakkar , Usha Awasthi , B S Aggarwal and Sons HUF and Devendra Pareek HUF executing two trades each, while Parasnath Buildwell Pvt Ltd carried out four trades.
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