Sebi imposes Rs 14 lakh fine on 2 entities for fraudulent trading in illiquid stock options

Markets regulator Sebi has imposed a penalty totalling Rs 14 lakh on two entities for indulging in fraudulent trading in illiquid stock options on the BSE.

The regulator has levied a fine of Rs 9 lakh on Ashwani Kumar Jain, and Rs 5 lakh on Bharat Jayantilal Patel.

After observing large-scale reversal of trades in the illiquid stock options segment of the BSE, the Securities and Exchange Board of India (Sebi) conducted a probe in the segment between April 2014 and September 2015.

The investigation showed that over 81 per cent of all the trades executed in the segment involved reversal of buy and sell positions by the clients and counterparties in a contract, which resulted into generation of artificial volumes.

The trades carried out by these entities (Jain and Patel) were non-genuine in nature and created a misleading appearance of trading in the illiquid stock options contracts, where there was negligible participation by the public, the regulator said.

By indulging in such activities, the entities have violated the provision of the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms, it added.

In a separate order on Tuesday, Sebi imposed a penalty of Rs 5 lakh on Informed Technologies India Ltd for disclosure lapses in the matter of Nagpur Power & Industries Ltd (NPIL).

A Sebi probe found that Informed Technologies India was the promoter of NPIL and had bought shares of the company during 2011-2014, which resulted in change in its shareholding in the company.

Further, the regulator observed that the company had failed to make disclosure to NPIL and BSE.

The regulator said that Informed Technologies India, being a promoter of NPIL, repeatedly failed in making disclosure to the company and BSE and it is observed that the default by the noticee is repetitive in nature.

By doing so, it has violated the provisions under PIT (Prohibition of Insider Trading) Regulations.