SEBI imposed Penalty in the matter of Gemstone Investments

SEBI imposed Penalty in the matter of Gemstone Investments

The Securities and Exchange Board of India (SEBI), in this case had observed huge rise in the traded volumes and/or price of the shares of the Gemstone Investments Limited(Company) and so it conducted an investigation in the scrip of Gemstone which is listed on the Bombay Stock Exchange for the period January 06, 2009 to December 30, 2009 (Investigation Period).

The Adjudicating Officer (AO) in his order concluded that certain entities including Anand Kalu Marathe (Noticee) had created artificial volume in the scrip of Gemstone and imposed penalties accordingly. The aforesaid AO order was challenged by the Noticee in the Hon'ble Securities Appellate Tribunal and the SAT set aside the AO order with respect to the Noticee and restored the matter to the file of AO.

Now, the AO in this matter has on consideration of the Show Cause Notice, its annexure and other material available observed that group of 31 entities ( (PPG entities) including the Noticee, in collusion with each other, had traded heavily in the scrip of Gems to neduring the Investigation Period. Out of 226 days on which the scrip of Gemstone was traded during the investigation period, the trades amongst PPG entities were executed on 90 days. Further, the PPG entities purchased 19,67,956 shares accounting for 39.67% of the total volume traded during the investigation period and sold 34,24,824 shares accounting for 69.05% of the total volume traded during the investigation period.

Further, 31 PPG entities including the Noticee, had also traded 12,41,518 shares (25.03% of the market volume) within PPG entities which accounts for 63.09% of the total purchase of the group and 36.25% of the total sale of the group. This is how the PPG entities contributed significant volume in the scrip of Gemstone during the investigation period.

The Noticee being part of the PPG entities, having executed trades in the investigation period, involving no change in beneficial ownership, has indulged in trading among the group entities and this has also contributed to the creation of artificial volume and such trading is fraudulent in nature. Hence it has been found out that the dealings of the Noticee are manipulative and therefore, the charges levelled against him regarding the contravention of the provisions of Regulations 3(a),(b),(c),(d) and Regulations 4(1), 4(2)(a), (b), (g) of PFUTP Regulations stand established

It has also been opined that the trade of the Noticee which contributed to the volume manipulation is certainly in the nature of causing adverse impact in disturbing the equilibrium of fair market mechanism.