Sebi slaps Rs 1.89-crore fine on 21 entities for fraudulent trading

Markets regulator Sebi has slapped a total fine of Rs 1.89 crore on 21 entities for executing fraudulent trading in the scrip of Sarang Chemicals Ltd.

Penalties levied by the regulator on the entities are in the range of Rs 2 lakh-Rs 20 lakh, for flouting market norms.

The matter pertains to an investigation conducted by Sebi in the scrip of Sarang Chemicals between January 2011 and June 2011.

During the probe, it was observed that a large volume of the company's shares were traded among a group of 19 connected entities and later a large volume of shares were sold by the group.

Apart from certain individuals, the group consisted of Om Education (IT) Pvt Ltd, Amrut Securities Ltd, Aum Technocast Pvt Ltd and Ayodhyapati Investment Pvt Ltd.

The group, thus, created artificial volume by trading among themselves and this volume constituted 87 per cent of the market volume. Subsequently, the group sold 97.8 per cent of the market volume at increased price.

Sebi in its order dated January 24 said it was observed that the company's shares were traded in less volume when the group did not trade in the market. However, when the group started trading among themselves, the volume of the scrip of the company raised substantially, it added.

The markets regulator said in the order that by fraudulently trading, the group created artificial volume and misleading appearance of trading in the scrip, thus violated Prohibition of Fraudulent and Unfair Trade Practices norms.

"The acts of artificially increasing the price of scrip have misled and induce gullible and genuine investors to trade in the scrip and harm them and, thus, the fundamental tenets of market integrity get violated with impunity due to such fraudulent acts," Sebi said.

The group of entities had executed their trades through stock broker Atlanta Share Shopee Ltd and sub-broker Presilco Impex Ltd.

For the brokers, Sebi said they had "facilitated the alleged trades to the group, wherein group indulged in repeated trading amongst themselves, which ultimately resulted into alleged creation of misleading appearance in the securities market and into creation of artificial volume/price rise in the shares of the company".

Consequently, for violating stock brokers regulations, Sebi has levied the monetary penalty on brokers.