NEW DELHI: Markets regulator Securities and Exchange Board of India (SEBI) has levied a total penalty of Rs 20 lakh on four entities for indulging in fraudulent and non-genuine trades in the illiquid stock options segment of BSE. The entities facing the penalty are: Arpna Capital Services Pvt Ltd, Assam Valley Finance and Investments, Aroma Chemicals and Anantnath Vincom Pvt Ltd, according to SEBI's separate orders.
The capital market regulator imposed a penalty of Rs 5 lakh each on the four entities. After observing a large-scale reversal of trades in the illiquid stock options, the regulator had conducted a probe from April 2014 to September 2015.
Pursuant to the investigation, SEBI found that a total of 2.91 lakh trades, comprising over 80 per cent of all the trades executed in stock options segment during the investigation period were non-genuine.
SEBI said that the four entities were among the various entities that indulged in non-genuine trades. "Reversal trades were undertaken by the Noticee with its counterparty with a pre-determined arrangement to book profit or losses respectively, and, therefore, the parties to the trades were not trading in the normal sense and ordinary course of business. Such transactions in illiquid stock options cannot be taken as genuine one," SEBI said about four entities in separate but similarly worded orders."
"These non-genuine and deceptive trades are covered under the definition of fraud and dealing of Noticee were fraudulent as defined under PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations," the regulator added.
By indulging in such trades, the entities violated PFUTP norms and thereby they are liable for a monetary penalty. In a separate order, the regulator imposed a fine of Rs 6 lakh on stock broker Arihant Capital Market for failing to settle the clients' funds within the stipulated time as well as for mis-utilisation of clients' funds.