Sebi imposes Rs 1.5-cr fine on 34 entities for fraud trade

Capital markets regulator Sebi Monday imposed a total penalty of Rs 1.5 crore on 34 entities for indulging in fraudulent trading that led to artificial volume in the shares of Shakti Pumps (India) Ltd.

The regulator conducted a probe into trading in the scrip of Shakti Pumps during the period February-July 2010 to ascertain any possible violation of PFTUP (Prohibition of Fraudulent and Unfair Trade Practices) norms by certain connected entities.

Pursuant to investigation, the Securities and Exchange Board of India (Sebi) found that 34 connected entities had "executed a large number of synchronised trades wherein the price, quantity and time of orders are matched amongst themselves and further executed reversal of trades wherein at the end of the day, the shares were transferred back to the originating party".

Further, the regulator said that these entities had contributed to price rise in the scrip fraudulently by repeatedly placing buy orders with group entities at a price higher than last trading price (LTP) and by manipulating the first trades of the day by placing buy orders at a price higher than LTP.

During the investigation period, Sensex moved up 9.25 per cent, while Shakti Pumps surged by 141.53 per cent.

According to the regulator, these 34 entities were indulged "in irregular trading activities -- synchronised trading, reversal trading and self-trades for creating artificial volume and misleading appearance of trading and for contributing to price rise fraudulently, in the scrip of Shakti Pumps".

Accordingly, the Sebi has levied a total penalty of Rs 1.5 crore on 34 entities. These fine varies from Rs 2 lakh to Rs 8 lakh.