SEBI levies ₹ 35 lakh fine on 3 firms for fraudulent trade

SEBI noticed that these entities by indulging in fraudulent trade practices increased the price of the scrip so as to enable the three preferential allottees to off-load their shares

SEBI
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Markets regulator SEBI on Monday imposed a total penalty of Rs 35 lakh on three entities for indulging in fraudulent trading in the scrip of Nutraplus India Ltd. The regulator, in an order, levied a fine of Rs 15 lakh on Shreenath Finstock Pvt Ltd and Rs 10 lakh each on Bhavin Sureshbhai Thakkar and Gedalia Multritrading Pvt Ltd. SEBI had conducted an investigation into the shares of Nutraplus between January 2015 and July 2017.

During the investigation, the regulator observed that there were two preferential allotments made by the company — on February 26, 2015 for 32,18,500 equity shares to 108 non-promoter entities and on March 12, 2015 for 13,49,848 equity shares to 48 non-promoter entities — which were under lock-in till June 15, 2016.

SEBI noticed that these entities by indulging in fraudulent trade practices increased the price of the scrip so as to enable the three preferential allottees to off-load their shares for a wrongful gain of over Rs 13 lakh. It was further revealed from the trading pattern of these entities that they increased the price of Nutraplus scrip artificially with a fraudulent intent.

Thus, their concerted trading in the scrip of Nutraplus not only contributed to the price rise but also squarely fit into the modus-operandi, SEBI noted. Also, the entities were part of a scheme, device and artifice wherein they manipulated the scrip price, effected price rise in the scrip and thereafter purchased part of the allotted shares from 3 preferential allottees — Bishan Narain Mittal HUF, Anchal Kishor Ostwal and Yogita Manoj Mittal– thereby enabling them to make wrongful gains. SEBI also noted that the entities misused the stock exchange mechanism for providing exit to the preferential allottees.

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Therefore, the entities increased the price of the scrip through manipulative trading pattern and also facilitated the preferential allottees to off-load their shares for wrongful gains, it added. These entities deliberately manipulated the price of the scrip and created a misleading appearance of trading in the scrip to induce innocent investors in the securities market thereby violating the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, the regulator said in the order.

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In a separate order, SEBI levied a fine of Rs 2 lakh each on five firms — Fidelity Multitrade Pvt Ltd, Pasha Finance Pvt Ltd, Bharat Jayantilal Patel, Acira Consultancy Pvt Ltd and Finquest Securities Pvt Ltd for indulging in fraudulent trading in the scrip of Seshasayee Paper and Boards Ltd. Sebi found that Fidelity Multitrade, Pasha Finance , Bharat Jayantilal Patel and Acira Consultancy were connected to each other and bought and sold shares of Seshasayee through a common connected broker, and acted as a group under a premeditated plan to indulge into circular trades.

They created misleading appearance of trading in the scrip without any intention of change in beneficial ownership. By doing so, they violated the provisions of PFUTP Regulations Also, Finquest Securities failed to exercise due diligence as a broker and acted as party to the fraudulent trades and violated the brokers norms.

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