Fraudulent trade: Sebi slaps Rs 50 lakh fine on DB (International) Stock Brokers

Markets regulator Sebi Tuesday slapped a Rs 50 lakh fine on DB (International) Stock Brokers Ltd for carrying out non-genuine and fraudulent trades in the illiquid stock options segment on the BSE.

"...by indulging in such execution of non genuine trades, Noticee (DB) created a misleading impression of trading in said stock option contracts in a fraudulent manner, and thereby, it violated provisions of... PFUTP Regulations," Sebi said.

PFUTP stands for Prohibition of Fraudulent and Unfair trade Practices.

During April 2014 to September 2015, Sebi had conducted an investigation into the trading activities of several entities which were suspected to be entering into non-genuine trades in illiquid stock options.

Pursuant to the investigation, the regulator found that the firm was among the several entities that executed non-genuine trades by reversing trades with same entities on the same day with wide variations in price without any basis for such wide variation.

"...Noticee (DB) executed 3,942 non genuine trades in 254 Stock Option Contracts, and thereby generated artificial volume of total 3,65,97,500 units," the regulator said in an order.

These non genuine and deceptive trades are covered under the definition of 'fraud' and dealing of the firm were fraudulent as defined under PFUTP Regulations, the Securities and Exchange Board of India (Sebi) said.

The acts of the firm make it liable for a monetary penalty, Sebi said while imposing a fine of Rs 50 lakh on DB (International) Stock Brokers Ltd.