sebi:EAD-5/BS/AO/97/2017-18

SEBI · SEBI · 2016-05-14 · Biju. S, Adjudicating Officer

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Facts / Headnote

Noticee found to have contravened PFUTP Regulations; penalty imposed under Section 15HA of SEBI Act, 1992

Provisions invoked

• s. 15
• s. 12A
• s. 15H
• s. 15J
• s. 15F

Regulations

• Reg. 4
• Reg. 3
• Reg. 200
• Reg. 3(a)

Parties

• Prefer Abasan Private Limited

Holding

The Noticee, Prefer Abasan Private Limited, was found to have indulged in self-trades and order book manipulation in the cash market in the scrip of Indian Overseas Bank on October 31, 2013 and November 28, 2013 with intent to create misleading appearance of trading without intention to change beneficial ownership, in order to make profits in the derivative segment, thereby contravening the PFUTP Regulations.

Full text

Page 2 of 33 APPOINTMENT OF ADJUDICATING OFFICER 2. Shri S.V. Krishnamohan was appointed as the Adjudicating Officer (AO) by SEBI vide order dated November 05, 2015. Subsequently, the undersigned was appointed as Adjudicating Officer vide order dated September 15, 2017 to inquire into and adjudge under Section 15HA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”), the violations alleged to have been committed by the Noticee.

Page 3 of 33 was between Rs.50.60 and Rs.51.35. From the above it is clear that the Noticee has no intention to manipulate the prices. Price increased by just Rs.0.75 on buy side and the same amount on the sell side.  Again referring to Annexure 1 it is submitted that the client has entered the first buy order at Rs.52 on 28/11/2013 and LTP was Rs.52.25. Therefore the profit is Rs.0.25 and not Rs.1.05 as alleged in the SCN.  It is further submitted that the calculation of profit as per para 15 in the SCN is not correct for the following reasons:- i) In the SCN at Annexure 3 the acquisition price is taken as Rs.47.42 and this price was compared with the final price for the month of October i.e. Rs.51 and the alleged profit of Rs.6.30 lakhs was arrived which is not correct. The acquisition price Rs.47.42 refers to September & October trades as stated in Annexure 3. ii) Similarly referring to Annexure 4 it is submitted that the average trade was Rs.51.15 on 28/11/2013 and the settlement price was 52.20 referred to para 3 & 15 of SCN. Therefore, the profit as per SCN is 52.20 - 51.15 = 1.05 whereas actually it should have been Rs.0.25 by referring to Annexure 1 November table, the client started trading at 52 & ended at 52.25 therefore the profit was Rs.0.25. Therefore the profit of Rs.2.81 lakhs is not correct as stated in the SCN.  Referring to the charges of deleting of the orders as at para no. 9 of the SCN it was submitted that on 31/10/2013 out of total buy order of 20,1

Page 4 of 33 5. Vide letter dated 14.05.2016, Noticee filed reply to the SCN. Extracts of the submissions made by the Noticee are reproduced hereunder:-  In the Notice you have inter-alia alleged that Prefer Abasan Private Limited (hereinafter referred to as ‘Noticee’/ ‘Prefer’/ ‘we’/ ‘us’) had indulged in the price manipulation on expiry dates of Future & Option contracts on October 31, 2013 and November 28, 2013 during the last half an hour of trade i.e 3.00 pm to 3.30 pm in the cash market to impact the closing price at NSE in order to make profits in the derivative segment and thereby contravened the provisions of Regulations 3(a) to (d), 4(1), 4(2)(a), (b), (e) and (g) of PFUTP Regulations.  Before proceeding to give reply on the allegations contained in the Notice, we would like to bring to your kind notice features of arbitrage/ jobbing/ hedging transactions:- i) An arbitrage / Jobbing/ hedging transaction is normally carried out only in the scrips which is quite liquid and is generally carried out to take benefit of the intraday price fluctuations that happen in the scripts in the same exchange or price difference in the same scrip across exchanges. ii) This is carried out only in the scrips which are reasonably liquid and have got a reasonable volume to enable the dealer to square off the position by end of expiry day. iii) We compare the position of various scrips both at BSE and NSE and then take a decision which would maximize our returns within due parameters o

Source: SecMarx — sebi:EAD-5/BS/AO/97/2017-18. 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.