sebi:Order/KS/AA/2018-19/2552
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Facts / Headnote
Penalty imposed on Noticee for violation of PFUTP Regulations
Provisions invoked
- s. 15
- s. 19
- s. 15H
- s. 15I
- s. 15J
- s. 15F
- s. 15I(1)
Regulations
- Reg. 3
- Reg. 3(a)
Parties
- Santosh Mittal
Holding
The Noticee violated Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of the PFUTP Regulations by executing 65 non-genuine reversal trades in 21 stock options contracts that created artificial volume of 1,28,24,000 units. A penalty of Rs. 5,00,000 was imposed under Section 15HA of the SEBI Act.
Full text
Page 2 of 22 crore units or 54.68% of the total market volume in stock options segment of BSE during the Investigation Period. It was observed that Santosh Mittal (hereinafter referred to as the “Noticee”) was one of the various entities which indulged in execution of reversal trades in stock options segment of BSE during the Investigation Period. Such trades were observed to be non-genuine in nature and created false or misleading appearance of trading in terms of artificial volumes in stock options and therefore alleged to be manipulative, deceptive in nature. In view of the same, SEBI initiated adjudication proceedings against the Noticee for violation of the provisions of Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”). APPOINTMENT OF ADJUDICATING OFFICER
Page 3 of 22 5. It was inter alia alleged in the SCN that the Noticee had executed 65 non genuine trades in 21 Stock Options contracts which resulted in artificial volume of total 1,28,24,000 units. The Noticee made a profit of approx. Rs. 1,19,46,650 by executing non genuine trades during the I.P. Summary of dealings of the Noticee in 21 Stock Options contracts, in which the Noticee allegedly executed non genuine trades during the I.P, is as follows: S. No. Contract Name Avg. Buy Rate (Rs.) Total Buy Volume (No. of units) Avg. Sell Rate Total Sell Volume (No. of units) % of Non Genuine trades of Noticee in the contract to Noticee's Total trades in the Contract % of Non Genuine trades of Noticee in the contract to Total trades in the Contract % of Artificial Volume generated by Noticee in the contract to Noticee's Total Volume in the Contract % of Artificial Volume generated by Noticee in the contract to Total Volume in the Contract 1 CIPL15AUG740.00PEW2 14.50 26000 33.65 26000 100% 22% 100% 50% 2 GMRI15JUL16.00CE 0.05 390000 1.31 390000 100% 45% 100% 40% 3 GMRI15JUL16.00CEW4 0.10 585000 0.95 585000 100% 20% 100% 45% 4 IDBI15FEB65.00PEW2 0.10 368000 1.60 368000 100% 11% 100% 24% 5 IFCI15AUG28.00CEW1 0.10 280000 1.40 280000 100% 6% 100% 10% 6 IFCI15JUL24.00PEW2 0.05 464000 1.34 464000 100% 40% 100% 73% 7 IFCI15JUL24.00PEW3 0.05 480000 1.43 480000 100% 24% 100% 34% 8 IOBL15AUG32.00CEW1 3.66 80000 7.40 80000 100% 23% 100% 53% 9 IOBL15JUL38.00PEW4 0.05 320000 1.60 320000 100% 29%
Page 4 of 22 6. From the above table, following was noted as regards to dealings of the Noticee: (a) The Noticee has executed non genuine trades in 21 contracts, wherein all trades of the Noticee in 20 contracts were non genuine trades. (b) No. of non genuine trades of the Noticee has significantly contributed to the total no. of trades from the market in the above contracts, as a substantial 6% to 60% of the trades that happened in the aforementioned contracts were due to non-genuine trades executed by the Noticee. (c) A substantial 63% to 100% of volume generated by the Noticee in each of the above contracts was artificial volume, and further artificial volume generated by the Noticee also contributed to significant 10% to 73% of the total volume from the market in said contracts. (d) Non genuine trades executed by the Noticee in above contracts had significant differential in buy rates and sell rates considering that the trades were reversed on same day.
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Source: SecMarx — sebi:Order/KS/AA/2018-19/2552. 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.