sebi:MO/40/IVD/12/03

SEBI · SEBI · 2003-07-21 · A.K. Batra, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Shri Sunil Kumar prohibited from buying, selling or dealing in securities, directly or indirectly, for a period of two years with immediate effect

Provisions invoked

• s. 11(4)
• s. 19

Regulations

• Reg. 11
• Reg. 3

Parties

• Shri Sunil Kumar

Holding

Shri Sunil Kumar was found guilty of creating a false market and hindering true price discovery in the scrip of VWL in violation of Regulations 3, 4(a), 4(b), 4(c) and 4(d) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 1995, and was prohibited from dealing in securities for two years.

Full text

2 was further adjourned to August 6, 2003 and the same was communicated to him vide letter dated July 21, 2003. He choose not to appear for the hearing. 4.0 I have examined the findings of the investigation, which inter alia contains the trading details of Shri Sunil Kumar, also incorporated in the show cause notice issue to him. 4.1 VWL was incorporated as a private limited company in the name and style of Ongoing Advertising and Packaging Pvt. Ltd. It was converted into a public limited company on February 20, 1996. On June 24, 1996, the name of the company was changed to Vatsa World Limited. On June 19, 2001, the name of the company was once again changed to Little Kingdom World Limited after acquiring the business of Little Kingdom Edutech Ltd., an education technology based company. 4.2 The price volume data in the scrip of VWL on DSE for the period from April 9, 2001 to July 20, 2001 is as follows : Date Opening Price Closing Price High Price Low Price Traded Quantity 09-04-01 12.50 12.50 12.50 12.50 500 10-04-01 9.50 9.50 9.50 9.50 300 12-04-01 9.55 9.55 9.55 9.55 200 25-04-01 8.00 8.00 8.00 8.00 100 27-04-01 7.00 7.00 7.00 7.00 100 30-04-01 6.50 6.50 6.50 6.50 200 03-05-01 5.00 5.00 5.00 5.00 200 23-05-01 6.50 6.50 6.50 6.50 500 24-05-01 8.00 8.00 8.00 8.00 500 25-05-01 10.00 10.00 10.00 10.00 500

3 28-05-01 10.25 11.15 11.15 10.25 800 29-05-01 11.00 11.00 11.00 11.00 200 30-05-01 12.00 12.00 12.00 12.00 200 31-05-01 13.00 13.00 13.00 13.00 200 01-06-01 12.00 13.00 13.00 12.00 500 05-06-01 11.15 11.15 11.15 11.15 500 06-06-01 9.90 10.50 10.50 9.90 1500 08-06-01 10.25 11.00 11.00 10.25 1000 20-06-01 13.75 13.75 13.75 13.75 900 21-06-01 17.15 17.15 17.15 17.15 500 22-06-01 19.25 19.25 19.25 19.25 1300 25-06-01 21.50 21.65 21.65 21.50 1100 26-06-01 23.35 23.35 23.35 23.00 1200 27-06-01 25.20 25.20 25.20 25.20 2000 28-06-01 27.05 27.20 27.20 27.05 1300 29-06-01 29.00 28.95 29.00 28.95 4800 02-07-01 30.35 31.25 31.25 30.35 700 04-07-01 30.25 33.50 33.50 30.25 1800 05-07-01 34.00 36.00 36.00 34.00 600 06-07-01 37.00 38.00 38.50 37.00 1200 09-07-01 40.00 40.00 40.00 40.00 500 10-07-01 43.05 43.05 43.05 43.05 500 11-07-01 0.00 43.00 0.00 0.00 100 4.3 During the above period, the closing price was found to have touched a high of Rs.43.05 and a low of Rs.5.00. The traded quantity was highest at 4800 shares on June 29, 2001. Further, the price of the scrip had showed a declining trend during the period from April 9, 2001 to May 3, 2001. During this period, the closing price of the scrip was found to have declined from Rs.12.50 to Rs.5.00. Thereafter the price of the scrip had increased substantially to Rs.43/- on July 10, 2001. The price was found to have been increased by 760% during the period from May 3, 2001 to

4 July10, 2001, over 25 trading days. The scrip of VWL was found to have been traded only for 33 days, and the total numbers of shares traded were only 26,700. The average traded volume per day worked out to be about 810 shares. Both the decline in price as well as the subsequent increase was found to have been accompanied by thin trading volumes, which in many instances were as low as one or two trades. Thus it is clear that there was very little trading interest in the scrip. 4.4 Information was sought by SEBI from the eight brokers identified by DSE as having dealt in the scrip during the period under investigation. The statement of four trading members, who had dealt in at least 5000 shares of the scrip on a gross basis, was recorded by SEBI during investigation. Argus was one of the four trading members. 4.5 A summary of the information collected from Argus Stock Broking Ltd. who had dealt in the scrip on behalf of Shri Sunil Kumar during the period under scrutiny is as follows: Sr. No. Settlement No. / Date Client Name Buy Quantity Price Sell Quantity Price 1. 25-04-01 Sunil Kumar 100 8.15 Nil Nil 2. 27-04-01 Sunil Kumar Nil Nil 100 6.85 3. 30-04-01 Sunil Kumar 200 6.65 Nil Nil 4. 03-05-01 Sunil Kumar Nil Nil 200 4.85 5. 23-05-01 Sunil Kumar 500 6.65 Nil Nil 6. 24-05-01 Sunil Kumar Nil Nil 500 7.88 7. 28-05-01 Sunil Kumar 300 11.00 300 11.00 8. 30-05-01 Sunil Kumar 200 12.15 Nil Nil 9. 31-05-01 Sunil Kumar Nil Nil 200 12.85 10. 01-06-01 Sunil Kumar 1000 12.50 500 12.15

Source: SecMarx — sebi:MO/40/IVD/12/03. 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.