Regulator Sebi on Monday barred Pine Animation and 72 other related entities from securities market for up to eight years in a case of alleged misuse of stock market platform.
These entities have been barred for a time period ranging from five years to eight years. The latest ban imposed by the regulator would include the debarment period already served by them, the Securities and Exchange Board of India (Sebi) said in an order.
The entire modus operandi of the case was first allot shares of the company on a preferential basis; then announce a stock split; pump up the share prices artificially; and eventually provide an exit to the preferential allottees at a higher price, it said.
"All the noticees (73 entities) that have been held guilty in this order have fulfilled their respective unlawful goals by playing around a scrip on the exchange platform which did not deserve to be traded the way it has been traded in the market due to absolute absence of basic fundamentals on which the trading prospect of a scrip rests," Sebi said in its 145-page order.
"Therefore, the activities, trading behaviour and conduct of the noticees as pointed out in this order strongly establish that they have violated the provisions of ... (Prohibition of Fraudulent and Unfair Trade Practices) regulations," it added.
While calculating the period of debarment, Sebi said "the period already undergone by the respective noticees, in pursuance of the interim order shall be taken into consideration"
In an interim order passed in May 2015, Sebi had banned Pine Animation and 177 related entities from securities market for alleged tax evasion worth Rs 420 crore.
".. It can safely be assumed that the entire modus operandi of allotting shares on a preferential basis, announcing a stock split and then bringing in connected entities to provide exit was a scheme devised to make ill-gotten gains," the regulator had said.
Sebi had noted that the modus operandi of pumping up the share price artificially and then dumping the price so that the same cycle could be repeated, demonstrates malafide intention of the Pine Group.
"Also the mechanism is presumably being used to deceive the authorities by laundering black money and making tax-free profits," it had said.
The irregularities came to the notice of Sebi after it detected a huge rise in traded volumes and price of Pine shares on the BSE during the period from May 22, 2013 to January 30, 2015.
According to the watchdog, two groups of entities were mainly involved in the alleged manipulations, with one group primarily involved in pushing the price up when the scrips allotted in preferential allotments were under lock-in period.
This was done through trades with negligible order quantity, while the second group acted as buyers to provide an exit to the preferential allottees, thereby creating artificial volume.