Sebi fines Pepson Steels for manipulative trades in illiquid stock options

Markets regulator Sebi Monday imposed a penalty of Rs 20 lakh on Pepson Steels for indulging in non-genuine trade, which created artificial volumes in illiquid stock options segment.

The order comes after Sebi in April had announced to take action in a phased manner against 14,720 entities for 'non-genuine trades' through illiquid stock option segment.

The regulator had said that adjudication proceedings have been initiated against 567 entities involved in such trades in the first phase.

In the past few days, the regulator has imposed fine on several entities, including individuals, involved in such trades.

The Securities and Exchange Board of India (Sebi) conducted an investigation into the trading activity in illiquid stock options on the BSE between April 2014 to September 2015 after observing large scale reversal of trades in the stock options segment of the BSE.

The regulator found that Pepson Steels was one of the various entities which were indulged in execution of non-genuine trades in stock options segment of the BSE during the investigation period.

"The noticee (Pepson Steels) by indulging in reversal trades on the stock exchange platform which are manipulative/unfair/fraudulent/ non-genuine, in nature, had created artificial volumes in the contracts.

"...I conclude that the noticee had violated the provisions of...PFTUP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations," Sebi Adjudicating Officer B J Dilip said in an order.

Accordingly, the regulator has imposed a "penalty of Rs 20 lakh on the noticee, Pepson Steels, ... for indulging in execution of reversal trades in stock options with same entities on the same day, thereby creating artificial volume, leading to false and misleading appearance of trading in the illiquid stock options on the BSE".