Sebi suspends SIC Stocks and Services for three months

Sebi has suspended stock broker SIC Stocks and Services for three months after finding it aiding the commission of fraudulent and manipulative trades.
The stock broker registration of SIC has been suspended for three months, which will be effective later this month.
A probe conducted by Sebi in respect of trading in the shares of Gangotri Textiles during April-May 2006 found that SIC had executed synchronised, circular as well as self trades for its client Purshottam Khandelwal.
Khandelwal through SIC had contributed the highest percentage to gross buy (32.47 per cent) and gross sell (32.24 per cent) transactions to the total quantity of shares of Gangotri traded on the BSE.

While SIC's contribution was highest among other entities in the context of synchronised trades, the circular trades carried out by Khandelwal through SIC in coordination with other entities created an artificial volume.
The number of self trades executed by SIC on behalf of Khandelwal were also abnormally large, Sebi noted.

"The figures from all the angles such as trade concentration, synchronised trades, circular/reversal trades, self trades and LTP analysis overwhelmingly present a picture of wanton manipulation by Purshottam," Sebi Whole-Time Member G Mahalingam said in an order dated April 28.
"I, therefore, find it difficult to appreciate SIC's suggestion that against the backdrop of an anonymous trading system, it could not have known that Purshottam was engaging in manipulative trades," he added.

Observing that a stock broker is expected to play the role of a gatekeeper and not just place trades in a mechanical manner solely with profit objectives, the Sebi whole-time member said "instant case goes beyond the realm of lack of due diligence, and quite clearly is an instance of aiding the commission of fraudulent and manipulative trades".
"The large scale of transactions and repetitive nature of the same coupled with its impact on volume and price on securities which are otherwise illiquid, lead to the inference that illegal synchronisation had in fact taken place," he added.
By indulging in such activities, SIC violated stock brokers norms, as per Sebi.

Accordingly, Sebi has directed that the "certificate of registration as a stock broker, of the noticee -- SIC Stocks and Services Pvt Ltd -- shall be suspended for a period of three months".