SEBI suspends two broking entities for misleading investors
MDT/PTI 31 August 2012

SEBI suspended registration of Rajkumar C Basantani and Kolar Sharex for allegedly misleading investors

 
Mumbai, Aug 30 (PTI) Market regulator Securities and Exchange Board of India (SEBI) has suspended the registration of two stock brokers for making false statements regarding issue of bonus shares of Soundcraft Industries in an alleged attempt to mislead the investors.
 
In separate orders, SEBI said it has suspended broker Rajkumar C Basantani, also Soundcraft Industries Ltd (SIL) promoter and chairman, for one year while brokerage firm Kolar Sharex for three months. Basantani and Kolar Sharex are registered with NSE and BSE, respectively.
 
The regulator, passed the two orders yesterday, after an investigation into complaints of irregularities against Soundcraft Industries as well as its promoters. The probe looked at the trading of SIL shares between 3 December 2003 to 17 August 2004 to ascertain possible violations.
 
During this period, the entities related to SIL or the brokers had offloaded 1.02 crore shares of the company on NSE.
 
SEBI found that Basantani made an announcement of bonus shares to its shareholders on 5 December 2003 and the same was approved by its shareholders on 31 December 2003.
 
However, SIL failed to dispatch certificates related to bonus shares. Later, when the confirmation about the dispatch of shares was sought from SIL, the company was found closed.
 
According to SEBI, the Serious Fraud Investigation Office (SFIO) also confirmed that physical share certificates relating to bonus shares were not dispatched.
 
Thus, the investors who had bought shares of SIL were cheated, at a time when the company was on the verge of closure, the fact which was known to Basantani and Kolar Sharexe and not to common investors.
 
The regulator said that Kolar Sharex was "instrumental in aiding and abetting SIL and Basantani in making false and misleading announcements which were inherently fraudulent, deceptive and manipulative and intended to induce investors to invest in the scrip of a loss making company." 
 
"Such device was orchestrated Rajkumar C Basantani who is promoter/director of the noticee (Kolar Sharex)to ensure that entities related to Rajkumar C Basantani/SIL could take advantage of the gullibility of the defrauded investors and offloaded their shares in the market," SEBI said in its order.
 
Prior to the announcement of bonus issue, shares of SIL were last traded on NSE on 9 September 2003.
 
After the false announcement of bonus shares by SIL, the trading activity in the scrip rose.
 
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