Illiquid stock options probe: SEBI issues adjudication order against 10 entities

Capital markets regulator Securities and Exchange Board of India (Sebi) has issued an adjudication order against a total of 10 persons or entities in the matter of trading in illiquid stock options at the Bombay Stock Exchange (BSE).

These entities or persons in question are Sanchita Roy, Malcom Sales Private Ltd, Late Radhey Shiam Khanna, Chelsea Blocks and Pipes Ltd, Late Shri Om Prakash Agarwal, Pinky Bhandari, Phool Chand Manchanda, Kartik Charan Kundu, Cherry Cosmetics Private Ltd and Late Kamlesh Bansal.

SEBI said it observed large-scale reversal of trades in the stock options segment of the Bombay Stock Exchange (BSE), leading to the creation of artificial volume.

After a preliminary probe conducted illiquid stock options matter, an interim order was passed on August 20, 2015. The regulator in its detailed investigation into the trading activity in the illiquid stock options segment at BSE from April 01, 2014, to September 30, 2015, found that 14,720 entities were involved in executing "non-genuine trades" in the BSE’s stock options segment during the investigation period.

In the case of Sanchita Roy, SEBI found a total of 2,91,744 trades comprising 81.40% of all the trades executed in the stock options segment of BSE during the IP were allegedly non-genuine trades, which created artificial volume in the stock options segment of the BSE.

In the case of Malcom Sales, it was observed that a total of 2,91,643 trades comprising 81.38% of all the trades executed in the stock options segment at BSE were trades, which involved a reversal of buy and sell positions by the clients and counterparties in a contract on the same day.

It was also observed that these trades resulted in the creation of artificial volume to the tune of 826.21 crore units or 54.68% of the total market volume in the stock options segment of BSE during the investigation period.

In the case of Late Radhey Shiam Khanna, 2,91,744 trades comprising a substantial 81.40% of all the trades executed in the stock options segment of the BSE during the probe period were "non-genuine". The regulator found similar irregularities in the cases of trades conducted by others as well.

The regulator also started recovery proceedings against five persons or entities, including Sorabh Mahesh Gupta in the matter of Radha Madhav Corporation; Harsh Kedia in the matter of illiquid stock options at BSE; Anoop Jain HUF, Anoop Jain, and Ritu Jain, in the matter of Global Infratech & Finance; Dukes Consumer Care in the matter of Kelvin Fincap; and Guide Dealcom LLP in the matter of Mangalam Industrial Finance.

Separately, SEBI has barred six individuals from accessing the securities market after its enquiry with regards to a fake Telegram channel, which artificially inflated the stock prices and made illegal profits by making false recommendations. The regulator has issued orders against six noticees, Himanshu Mahendrabhai Patel, Raj Mahendrabhai Patel, Jaydev Zala, Mahendrabhai Bechardas Patel, Kokilaben Mahendrabhai Patel, and Avaniben Kirankumar Patel, asking three of them to pay ₹5.68 crore penalty. At the same time, the rest have to pay ₹5 lakh for these violations.