Sebi fines 5 entities for fraudulent trade in stock options

Markets regulator Sebi has slapped a total fine of Rs 45 lakh on five entities for executing fraudulent trades, which created artificial volumes in the illiquid stock options segment on the BSE.

Those facing penalties are Jay Jyoti India, Lalit Gulati, Liberal Properties, Lokesh Kumar Goyal and Doubledot Finance.

The regulator conducted a probe into the trading activities of certain entities in illiquid stock options on the BSE from April 2014 to September 2015 after observing large-scale reversal of trades in the BSE's stock options segment.

The probe found that over 81 per cent of all the trades executed in the BSE's stock options segment were the ones which involved reversal of buy and sell positions by the clients and counterparties in a contract.

The five entities were among those clients whose reversal trades involved squaring off transactions with significant difference in sell and buy values of the transactions.

"The noticee, by engaging in non-genuine transactions which created a misleading impression of trading in respective contracts, dealt in the stock options contracts in a fraudulent manner in violation of .... PFUTP Regulations, 2003," Sebi noted in five similar-worded but separate orders.

By doing so, the firms have violated the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations.

Accordingly, the Securities and Exchange Board of India (Sebi) has levied a fine of Rs 25 lakh on Jay Jyoti India and Rs 5 lakh each on Lalit Gulati, Liberal Properties, Lokesh Kumar Goyal and Doubledot Finance.

In April, Sebi announced to take action in a phased manner against 14,720 entities for fraudulent trade in illiquid stock options segment and passed several orders in past few weeks against such entities.

In a separate order on Wednesday, Sebi levied a penalty of Rs 10 lakh on three promoters of Timbor Home Ltd for violating insider trading and takeover norms.

The regulator conducted a probe between April 2014 and May 2015 and found that the shareholding of the firm's four promoters decreased from 29.90 per cent to 0.29 per cent.

The promoters had transferred more than 25,000 shares of the company through off-market and on-market transactions to related entities. However, they failed to make disclosure about the same to the company and exchanges as required under PIT (Prohibition of Insider Trading) and SAST (Substantial Acquisition of Shares and Takeovers) norms.

"Noticees had, pursuant to their repeated sale transactions, substantially reduced the promoters' shareholding in the company in clandestine manner as they failed to make timely disclosure in the prescribed form about the relevant details of their transactions," Sebi said.

Accordingly, it imposed fine of Rs 4 lakh each on Suresh Chandra Maloo and Maloo Building Materials and Rs 2 lakh on Manan Vidhyapati Patel.