SEBI imposes penalty of Rs.15 lakhs in respect of 79 entities in the matter of Viji Finance Limited

SEBI imposes penalty of Rs.15 lakhs in respect of 79 entities in the matter of Viji Finance Limited

Delay on the part of SEBI in initiating proceedings for violation of any provision of the Act cannot be a ground to quash the penalty imposed for such violation.

SEBI has directed a penalty of Rs.15 lakh under Section 15HA of SEBI Act payable jointly and severally by Noticees 1 to 78 for violation of Section 12A(b) of SEBI Act read with Regulation 3(c) and 4(2)(a) of PFUTP Regulations.

In this matter, the Securities and Exchange Board of India (SEBI), initiated adjudication proceedings against 79 Noticees. under section 15HA of Securities and Exchange Board of India Act, 1992 (SEBI Act)for the alleged violations of Section 12A(a), (b), (c) of SEBI Act read with Regulations 3 (a), (b), (c), (d), 4 (1) and 4 (2) (a),(e) and (g) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003 (PFUTP Regulations).

The Noticees in their replies had admitted to making small amounts of profits or losses through their trades. The profits were in the range of a few hundred rupees to around Rs.12,000 for some of the Noticees. The losses were ina similar range. The total number of participants in the scrip during the IP were 577, of which 210, including the 78 Noticees were trading in a synchronized manner. This indicated the number of investors who may have been affected by the trading volumes in the scrip during the time.

It became clear that even though the trade-wise LTP contribution of all Noticees appeared significant in Patch 3 at Rs. 371.20,the actual impact on price rise of the trades by the Noticees was not seen due to constant up and down movement in the price, and over certain periods, the price fell despite positive LTP contribution by the Noticees trades.

It was also observed that while synchronized trades are not per se illegal, it is pertinent that in this case, the Noticees 1 to 78 had been abled trades to take place in their accounts in a premeditated and synchronized manner, giving an artificial impression of large trading volumes in the scrip, thereby violating provisions of Section 12A(b) of SEBI Act read with Regulation 3(c) and 4(2)(a) of PFUTP Regulations.

It was opined that the SEBI Act does not provide for any limitation period for initiation of proceedings, issuance of SCN or for completion of the Adjudication Proceedings. In this respect, reference was made to the order passed by Hon'ble SAT in the matter of Metex Marketing Pvt. Ltd. vs. SEBI wherein Hon'ble SAT held that in the absence of any specific provision in the SEBI Act or in the Takeover Regulations, the fact that there was a delay on the part of SEBI in initiating proceedings for violation of any provision of the Act cannot be a ground to quash the penalty imposed for such violation.