SC issues notice to Indiabulls

The Supreme Court has issued a notice to Indiabulls Securities after the Securities and Exchange Board of India (Sebi) challenged a Securities Appellate Tribunal (SAT) order. The order had set aside the penalty imposed on the firm by the market regulator for alleged manipulative and fraudulent practices in the futures and options segment.

Issuing the notice to Indiabulls, a three-judge bench headed by Chief Justice S H Kapadia asked the brokerage firm to file its reply.

Sebi had, on February 25, 2009, imposed a fine of Rs 15 lakh on Indiabulls Securities for manipulative and fraudulent practices in futures and options during the January-March period, 2007. Indiabulls Securities, however, challenged Sebi’s order before appellate tribunal SAT, which on October 26, 2010, set aside Sebi’s order. SAT said it had studied the issue and felt there were no fraudulent practices involved.

According to Sebi, its probe into transactions in the derivatives segment of the National Stock Exchange from January to March, 2007, revealed some brokers bought and sold almost equal quantities of contracts within a day. After the preliminary examination, the market regulator found certain entities, including Indiabulls, had executed irregular trading practices.

Sebi found Indiabulls had executed 23 non-genuine and reverse trades on behalf of 15 clients in 21 futures and two options contracts on 22 different underlying scrips and one bank Nifty futures. It also found that in several cases, the same stockbroker was appearing on the buy side as well as the sell side. Some of these transactions, which included stocks such as Bajaj Auto, PNB and GE Shipping, constituted over 50 per cent of the market volume.