Sebi imposes Rs 7 lakh penalty on Reliance Strategic Investments Ltd

Sebi on Friday penalised Reliance Strategic Investments Ltd for alleged manipulation in certain trades in long-dated Nifty options in 2017.

The case pertains to certain trades in long-dated Nifty options between Reliance Strategic Investments and Morgan Stanley France SA done back in 2017.

The Securities and Exchange Board of India (Sebi) conducted an investigation into the trades done on July 31, August 8 and August 10, 2017. Based on the findings of the probe, the regulator alleged violations of certain PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations by both entities.

In an order on Friday, Sebi imposed a fine of Rs 7 lakh on Reliance Strategic Investments Ltd (noticee).

"The observations relating to the conduct of noticee and other attending facts and circumstances of the case... when applied to the test of preponderance of probability, lead me to the undeniable conclusion that noticee had engaged in manipulation of the price/premium of 11400 PE at least on two trading days i.e. August 08, 2017 and August 10, 2017," Sebi's Adjudicating Officer Soma Majumder said in the order.

Sebi noted that there was absence of any internal policies to demonstrate noticee's trading decisions to execute the relevant trades at such discounted prices and lack of any evidence to establish that indeed other quotes had been obtained/considered by noticee and that these were the best prices available.

Taking into consideration these factors, the regulator said, "it will not be wrong to conclude that the relevant trades by noticee at a significant discount from the fair value, through a mutual arrangement with its counterparty, at least on two days, without any proper justification, were manipulative in nature".

In the instant case, Sebi said it is not possible from the material on record to quantify the amount of disproportionate gain or unfair advantage resulting from the default of the noticee or losses suffered by investors as a result of the default.

"Further, material available on record also do not show that default of noticee is repetitive in nature. I note from the reply of noticee i.e. the traded value involved in the Relevant Trades is also substantial, being around Rs 984 crore. I am conscious of fact that fraud is a serious offence," it said.

In March this year, Morgan Stanley France SA had settled the matter by paying Rs 25,35,000 as settlement charge.