SEBI slaps penalty on 9 entities for violation of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations

SEBI slaps penalty  on 9 entities for violation of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations

The 9 Noticees were found to have indulged in a fraudulent scheme of manipulation in the scrip of Maa Jagdambe Tradelinks Limited

The Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs. 5 lakh on each of the 9 entities (Noticees) in the matter of Maa Jagdambe Tradelinks Limited.

Herein, the SEBI had initiated an investigation into the scrip of Maa Jagdambe Tradelinks Ltd. (company/MJTL) regarding allegations of generation of bogus Long Term Capital Gains (LTCG) in the scrip of MJTL during the period May 1, 2013 to July 31, 2015 (investigation period which was divided into 3 patches).

It was observed that Anirudh Parashar, Rakesh Ramsingh Saini, Akash Sukhdev Swami, Santosh kumar Satyanarayan Podar, Kamal M Tibrewala, Subhash D Bhatiwada, Avinash Kumar Ardwatia, Surendra Kumar Tiwari and Sanjay Kumar Poddar (Noticees 1 to 9, respectively) had indulged in a fraudulent scheme of manipulation in the scrip of MJTL and allegedly violated Regulations 3(a), (b), (c) and (d) and Regulations 4(1), 4(2)(a)and(e) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices in relation to the securities market), 2003 (PFUTP Regulations).

The Show Cause Notice (SCN) had put forth that the Noticees 1 to 6 were well connected with each other. Noticees1 to 6 (except 5)were among the top ten sell LTP contributors during patch I and contributed 69.66% to market positive LTP in 57 trades. Noticees7, 8 and 9 were also among the top ten sell LTP contributors during patchIand contributed 6.48%, 9.68% and 11.95%, respectively, of the total market positive LTP. It was observed that Noticees 1 to 5 were among the top ten sell LTP contributors during patchII.

The submissions of the Noticees were in the context of explaining their personal connection as alleged in the SCN and citing the details of the trades executed by them during the investigation period. They had also denied having any connection with the Company or other Noticees and objected to the clubbing of their respective trades with the trades of other Noticees stating that they had traded in the scrip independently of other Noticees.

The Adjudicating Officer(AO) mainly discerned that the Noticees had placed their last minute miniscule sell orders to match the long pending buy orders for large quantities, and in some cases, their orders were placed just before the closure of the ongoing auction session. Had the Noticees not placed their orders in the last minutes of those ongoing hourly sessions, the buy orders would have been deleted from the system, by virtue of the applicable guidelines of PCAS (Periodic Call Auction Session).

The AO also established that the Noticees1, 2, 3, 4 and 6 (who were having connection), while trading in the scrip of MJTL during Patch I of the investigation period had contributed ₹107.56 to the LTP of the scrip of MJTL by resorting to manipulative and fraudulent trades as alleged in the SCN. Similarly, Noticees7, 8 and 9, also through their manipulative trades, had contributed ₹10.00, ₹14.95 and ₹18.45, respectively, to the positive LTP of the scrip. Thus, the acts of trading in the scrip of MJTL by the Noticees 1, 2,3, 4, 6, 7, 8 and 9 during Patch-I were in violation of Regulations 3(a), (b), (c), (d) and Regulations 4(1), 4(2), (a) and (e) of the PFUTP Regulations.

Moreover, the Noticees1, 2, 3 and 4 who had been alleged to have executed manipulative trades in Patch II had also been alleged for their trades during Patch I of the investigation period. The AO also observed that the trades executed by the Noticees1 to 5 during Patch II of the investigation period were manipulative and fraudulent and due to such manipulation, the trades executed by them had caused increase in the price of the scrip of MJTL by ₹40.30.

Therefore, the AO held that as rightly alleged in the SCN, acts of manipulative trades executed by the Noticees 1, 2, 3, 4 and 5 resulted in violation of Regulations 3(a), (b), (c) & (d), and Regulations 4(1), 4(2)(a) & (e) of the PFUTP Regulations.