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Market regulator Sebi has confirmed its interim order banning 21 entities in a case related to tax evasion and illegal gains through misuse of stock exchange mechanism.
A detailed investigation is on against others.
Sebi in an interim order dated June 1 had barred Dhyana Finstock and 75 other entities, including the aforesaid 21, from the market for using the securities system to artificially bump up volume and price of the scrip to provide illegitimate gains to preferential allottees.
The end purpose, according to the Securities and Exchange Board of India, is to claim long-term capital gains (LTCG) benefits.
As per the interim order, the probe by Sebi and BSE began after the stock exchange received complaints from several investors in July last year that they have entered into buy trades in Dhyana on July 27, 2015 based on the stock tips received through SMS.
According to the earlier order, a website registered in Pakistan -- 'bsebull. In' -- was used to lure investors through fraudulent SMSes. A number of buy orders were placed based on messages appearing on bsebull. In, Sebi had noted.
The latest order comes after the 21 entities did not submit their reply and failed to avail of personal hearing after the interim order was passed in June.
"I am of the view that the noticees (21) are deliberately keeping away from these proceedings and are not willing to co-operate," Sebi Whole-time Member Rajeev Kumar Aggarwal said.
As per the interim order, the company, its directors, promoters, preferential allottees and the Dhyana group employed a device wherein "the company in nexus with the preferential allottees made a facade of preferential allotment".
After the expiry of the lock-in period, the Dhyana group purchased shares from preferential allottees at artificially increased prices. In the whole process, entities of the Dhyana Group provided a hugely profitable exit to the preferential allottees.
The regulator noted that the beneficiaries made a collective profit of Rs 107.43 crore on a collective investment of Rs 5.22 crore, a whopping return of approximately 2,060 per cent on their investment in 20 months.
In its latest order, Aggarwal said he did not find "any reason to revoke or modify the directions of the interim order dated June 1, 2016, in the matter of Dhyana Finstock Ltd against the noticees (21 entities)".
Accordingly, Sebi has confirmed the interim order passed against the 21 entities.
Sebi had prima facie found that the entities acted in concert for implementation of the dubious plan, device and artifice that has led to the misuse of stock exchange mechanism.
The rules pertaining to calculation of the indicative amount for settlement are also likely to be amended. In order to provide diversified options for investors, Sebi has proposed 'alternative securities' as a new asset class for investments by mutual funds. For now, it will have only REITs and InvITs. The move is likely to help in attracting more number of investors into REITs and InvITs. A mutual fund will be permitted to invest only up to 5 per cent of their net asset value in units of a single issuer of alternative securities.
The limit will be 10 per cent for total exposure to alternative securities. These caps will not be applicable in the case of index funds. To boost municipal bonds, also known as muni bonds, Sebi is planning to amend the relevant regulations in order to provide criteria that are alternative to 'net worth' of the municipalities. The concept of net worth basically applies to a corporate entity and might not be applicable to a municipality in absolute terms. To gauge the financial capacity of a municipality, an alternative criterion is being worked out, the official said. According to the proposal, a municipality planning to issue bonds should not have negative net worth or material deficit as per its income and expenditure statement for three preceding financial years. Sebi could also come out with any financial criteria from time to time. The board will also discuss the status of amendments to regulations related to REITs and InvITs. Amendments to these regulations were notified in November last year and subsequently two InvITs have filed their offer documents with Sebi. Besides, the regulator will consider a proposal of calibrating the fees, upwards or downwards, for other regulatory works. It plans to levy a filing fee on draft scheme of arrangements on the lines of amount charged for placing offer documents. Sebi observed that similar work and allocation of resources are involved in respect of processing of draft schemes of arrangements as it is for offer documents. Further, it plans to charge fee for application under buyback regulations. It is considering to impose a processing fee of Rs 1 lakh on an application for relaxation of strict enforcement of Sebi's ICDR (Issue of Capital and Disclosure Requirements) regulations. Currently, no fee is being charged for processing of such requests. Also, it plans to revise upwards the panel exemption fee under takeover norms to Rs 5 lakh from Rs 3 lakh. With regard to regulatory fee from exchanges, Sebi will continue with the present fee structure.