Sebi to take action against 14,720 entities for carrying non-genuine trades

Sebi came across violations by 14,720 entities while it was probing 59 entities in a case related to alleged trading irregularities in stock options segment of the BSE

Securities and Exchange Board of India (Sebi) has decided to take appropriate regulatory action against more than 14,700 entities in a phased manner for executing "non-genuine trades" through illiquid stock option segment.

Adjudication proceedings have been initiated against 567 entities involved in such trades in the first phase.

The markets regulator came across violations by 14,720 entities while it was probing 59 entities in a case related to alleged trading irregularities in stock options segment of the BSE.

The 59 entities were probed to check whether they violated norms pertaining to fraudulent trade activities during the period from April 1, 2014 to March 31, 2015.

Later, the scope of investigation was expanded to cover all the entities that had indulged in executing reversal trades in BSE's Stock Options segment. The time period was also extended to September 30, 2015.

"The investigation has found that 14,720 entities were involved in executing non-genuine trades in BSE's Stock Options segment during the investigation period," Sebi Whole Time Member Madhabi Puri Buch said in an order today.

She also noted that adjudication proceedings have been initiated against 567 entities in the first phase.

According to the regulator, there is a need for some similarity of approach in taking action against the various entities even though the difference in amount of profit made or loss incurred through the non-genuine trades varies.

Through an interim order in August 2015, Sebi had restrained the 59 entities from the securities markets till further directions. The interim directions were confirmed by other orders in July 2016 and August 2016 after providing "certain relaxations".

However, the directions have been disposed of against two out of the 59 entities as the regulator did not come across any adverse findings.

"With reference to the remaining 57 entities, investigation has found that these 57 entities along with 14,663 other entities, were involved in executing non-genuine trades thereby violating... Sebi (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations," Buch said.

Since the 57 entities would be subject to adjudication proceedings, the watchdog has decided to drop the proceedings that were initiated earlier.