Sebi fines Indiabulls for 'fraudulent practices'

The Securities and Exchange Board of India (Sebi) has slapped a fine of Rs 15 lakh to Indiabulls Securities for conducting “manipulative and fraudulent” practices in the Futures and Options (F&O) market during January to March 2007. Sebi fines Indiabulls for unfair F&O transactions.

In its adjudication order today, the regulator said that during the period, Indiabulls Securities had carried out reversal transactions in 23 F&O contracts.

It said that the stock-brokers trading in F&O contracts at NSE were buying and selling almost equal quantities of contracts within the day and such buy or sell was synchronized in nature.

In most of the cases, the same quantity and in few cases substantially the same quantity of the original trade was closed out during the day at a price which was significantly above or below the price at which the original transaction was executed without significant variations in the traded price of the underlying. It was also seen that in several cases the same stock-broker was appearing both on the buy side as well as the sell side.

Some of these transactions, which included stocks like Bajaj Auto, PNB and GE Shipping, constituted of over 50 per cent of the market volume. These reversal transactions resulted in a close out difference, which refers to gains or losses due on such activities, of Rs 35.43 lakh.

Sebi said that the price of underlying security remained at levels Rs 1,090-Rs 1,115.75, that is a change of only 2.36 per cent when both the transactions were undertaken.

However, replying to the show cause notice, Indiabulls said that it has not been involved in any fake trading or price fixing in the F&O segment and it has not traded directly or indirectly in its own account in the 23 trades mentioned. The company added that the close out difference of Rs 35 lakh was relatively a small amount and hence it did not appear to be suspicious and alarming.

As per Sebi norms, a company becomes liable to pay a penalty of Rs 25 crore or three times the amount of profits made out of such practices for fraudulent and unfair trade practices.