Sebi slaps Rs 40 lakh on 8 entities for indulging in non-genuine trades

Capital markets regulator Sebi on Wednesday imposed penalties totalling Rs 40 lakh on eight entities for indulging in non-genuine trades in the illiquid stock options segment on the BSE.

In eight separate orders, the watchdog slapped fines of Rs 5 lakh each on Dwitiya Trading Ltd, Vineeta Kabra, Puneet Sabharwal HUF, Hemant Purshotamdas Gopani HUF, Mudrikaben Pareshkumar Shah, Gopalkrishna Ratanlal Shah HUF, Prabir Saha, and Sudha Jain.

The orders came after the Securities and Exchange Board of India (Sebi) observed large-scale reversal of trades in the illiquid stock options segment of BSE, leading to the creation of artificial volume.

Thereafter, Sebi conducted a probe into the trading activities of certain entities in illiquid stock options on BSE for the period from April 2014 to September 2015.

According to Sebi, reversal trades are the trades in which an entity reverses its buy or sell positions in a contract with subsequent sell or buy positions with the same counterparty.

The reversal trades are alleged to be non-genuine trades as they lack basic trading rationale and allegedly lead to a false or misleading appearance of trading, leading to the generation of artificial volume, the regulator said in the order.

"The trading behaviour of the noticees (eight entities) confirms that such trades were not normal, indicating that the trades executed...were not genuine trades and being non-genuine, created an appearance of artificial trading volumes in respective contract," Sebi said.

Accordingly, these eight entities flouted the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms stand established, it added.

In a separate order on Wednesday, the regulator suspended the certificate of registration granted to Sumit Kumar Waghmare for six months for flouting investment adviser rules.

The order came after the regulator had carried out an inspection of Waghmare (a Sebi-registered investment adviser) in respect of the investment advisory services rendered by him for the period from April 2020 to March 2021.