sebi:10616

SEBI · SEBI · 2001-06-18 · A. K. Batra, Whole Time Member

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Facts / Headnote

BM found guilty of aiding and abetting price manipulation; restrained from dealings in the securities market for a period of two years

Provisions invoked

• s. 11
• s. 11(3)
• s. 11B

Regulations

• Reg. 11
• Reg. 4
• Reg. 4(a)
• Reg. 4(d)

Parties

• Bishwanath Murlidhar (BM), proprietor of M/s Bishwanath Murlidhar, member BSE

Holding

BM was found guilty of aiding and abetting KIL and SIL in the price manipulation of the scrip of Snowcem India Ltd., in violation of Regulations 4(a), (b) and (d) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995. A direction restraining him from dealings in the securities market for a period of two years was imposed.

Full text

M/s. Snowcem India Ltd. (hereinafter referred to as ‘SIL’) was incorporated on January 28, 1959, as a private limited company. SIL is engaged in the manufacture of exterior paints and allied products. The shares of SIL are listed for trading on the Stock Exchange, Mumbai, the Madras Stock Exchange, the Delhi Stock Exchange and the Ahmedabad Stock Exchange (for brevity’s sake hereinafter referred to as ‘BSE’, ‘MSE’, ‘DSE’ and ‘ASE’ respectively) apart from trading under the permitted category at the National Stock Exchange (hereinafter referred to as the ‘NSE’) A substantial spurt in the price of the scrip of SIL was noticed at both BSE & NSE during the period from June 1999 to August 1999. During the aforesaid period, a spurt in the volumes was also noted as compared to the period prior to June 1999 when it was observed that the scrip of SIL was not very liquid. The price of the scrip of SIL at NSE, during the period June 3, 1999 to August 10, 1999 ranged between Rs.55/- to Rs.127/-. Further, the trading in the scrip was found to be very infrequent during the period abovementioned as evidenced from the trading statistics shown below: Period Avg. trades per day Avg. Quantity Per day March to May 99 3 12,521 June to August 99 173 68,370 From an average daily volume of 12,521 shares during the period from March to May 1999, the volumes started rising and were in the range of 60,000 - 65,000 shares per day till August 1999. The movement of the scrip (in terms of the price) was mo

5. From an analysis of the trading details of the various members as well as their clients who had traded in the scrip of SIL, it was observed that some entities associated/close to the Snowcem Group had been actively involved in trading of its shares during the relevant period resulting in an unusual spurt in prices and traded volumes. It was also observed that in some settlements, their contribution was as high as over 90% of the total market activity.

these shares were getting absorbed into the market in spite of the fact that the scrip was not so liquid. 8. In view of the findings of the investigation, a notice dated July 15, 2002 was issued by SEBI to BM asking him to show cause as to why directions prohibiting him, from dealings in the securities market for a suitable period should not be issued to him under section 11B of the Act read with Regulation 11 and 12 of the SEBI ( Prohibition of fraudulent and unfair trade practices relating to the securities market) Regulations, 1995 (for brevity’s sake hereinafter referred to as the ‘Regulations’). BM was directed to reply to the said notice within 21 days of the receipt thereof and it was also indicated to him that if he failed to reply within the said time, it would be presumed that he had nothing to say in the matter and that SEBI would be free to take such action as deemed fit.

Source: SecMarx — sebi:10616. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.