Illiquid stock options matter: Five entities settle cases with Sebi

Markets regulator Sebi on Tuesday disposed of adjudication proceedings against five entities after they settled cases related to alleged fraudulent trading in the illiquid stock options segment of BSE on payment of Rs 86 lakh towards settlement charges.

Those who have settled the cases are Vineet Gupta, Vinod Commodities, VN Shah, Vipul Commodity and Vimal Finstock, according to five settlement orders passed by Sebi.

In its order, Securities and Exchange Board of India (Sebi) said it observed a large scale reversal of trades in the stock options segment of BSE, leading to the creation of artificial volume.

Pursuant to the same, the regulator initiated an investigation into the trading activities of certain entities in the illiquid stock options at BSE for the period April 1, 2014, to September 30, 2015.

During the investigation, Sebi found that the five entities were allegedly indulged in non-genuine trades and created a false and misleading appearance of trading in the stock options segment.

These allegedly resulted in a violation of the provisions of the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations and in view of this, Sebi initiated adjudication proceedings and issued show-cause notices to them.

During the proceedings, the entities filed an application for settlement with Sebi.

In January this year, Sebi passed an order under its settlement scheme in respect of 1,018 entities, including five entities, for settlement of proceedings initiated for defaults.

Consequently, Sebi in its order on Tuesday said that no further inquiry was required in the present matters and the show cause notices issued to the five entities have been disposed of accordingly.

Individually, Vineet Gupta paid Rs 31.77 lakh towards settlement charges, Rs 14.72 lakh each by Vinod Commodities and VN Shah, Rs 13.17 lakh by Vipul Commodity and Rs 11.62 lakh by Vimal Finstock.

In a separate order, the regulator has imposed a penalty of Rs 5 lakh on Vaksh Steels for indulging reversal trades in stock options with the same entities on the same day, thereby creating artificial volume, leading to a false and misleading appearance of trading in the illiquid stock options at BSE.

By indulging in this, it violated the provisions of PFUTP norms, Sebi noted.