Sebi bans Somplast Leather, 25 entities for fraudulent trading

Sebi today barred Somplast Leather Industries and 25 other entities from the securities market for allegedly indulging in fraudulent trading activities.
According to the market regulator, the entities violated several norms of the Sebi (Prohibition of Fraudulent and Unfair Trade Practices) in preferential allotment of shares and also failed to comply with listing agreement of BSE while materialising these shares.
Sebi said that the company fraudulently allotted preferential shares in the year 2000 by allegedly routing funds through connected entities to the preferential allotees.
The Securities and Exchange Board of India (Sebi) said the allotees by lending their names, acted as front in the preferential allotment of Somplast, and aided the company and its officials in committing fraud upon the investors.

Further, the regulator said that the shares which were issued in the preferential allotments were dematerialised without listing them on the stock exchanges "which clearly indicated fraudulent intention" of Somplast and its directors.
"... Somplast and its registrar and share transfer Agent had not credited shares in the demat form to accounts in NSDL system and the trading in the shares of Somplast was suspended by BSE with effect from February 27, 2003 due to non compliance of formalities of listing of shares allotted in the preferential allotment," Sebi said.

In an order by Sebi Whole Time Member Rajeev Kumar Agarwal, a ban was imposed on 26 entities which include the company, its directors and the preferential allotees.

While Sebi banned 10 entities for three years, 15 entities were barred for one year and one person for five years.
Sebi also directed that the shares of Somplast allotted in the preferential allotment lying in the demat accounts of the concerned allotees shall remain frozen.
The regulator also directed Somplast not to give effect to transfer of any shares acquired and held by the entities through preferential allotment in July 2000.
Besides, the 16 preferential allotees have been restrained from exercising voting rights (including through nominee or proxy) or other rights attached to the shares held by them in the company.