Mumbai: The capital market regulator Sebi had unearthed around thirteen major fraudulent and unfair trade practices in the securities market in FY16 including diversion of IPO proceeds by the issuer company, circulation of price sensitive information like declaration of dividend to few related entities, reporting false and misleading financial information and front running of trade information.
Sebi passed a total of 13 interim orders barring individuals and entities from dealing in the securities market till further direction. In one instance relating to an IPO, the issuer company according to Sebi used the IPO proceeds to fund net buyers who supported the price on the listing day. The company also used the proceeds to fund group companies in the form of inter corporate deposits while some portion of the funds raised was also siphoned off.
The surveillance by Sebi also unearthed a case where an equity dealer appointed by a Asset Management Company (AMC), which runs a mutual fund and a portfolio management service (PMS) passed on information of impending orders and instructions to his wife and another person.
“On the basis of such information and instructions received from the dealer, his wife and another person were observed to be front-running the trades of the mutual fund and PMS from which they made a substantial profits,” Sebi said while listing out major frauds committed in FY16 without taking names in its latest annual report.
In another instance of market manipulation a company circulated text messages in the market regarding its dividend declaration. A group of certain company related entities bought shares before the messages were circulated by the company and subsequently sold those shares after the circulation of messages.
Another company and its related entities committed fraud by planting false and misleading news of a proposed buy-back and payment of dividend, which influenced the price of the company’s scrip.
On a total, the regulator imposed a monetary penalty of Rs 7273 crore on 103 companies in FY16 for indulging in fraudulent and unfair trade practices as compared to Rs 241.7 crore in FY15.
During the said period, the regulator had issued warnings to 496 entities while prohibitive directions were issued against 1,726 entities. The regulator has initiated investigations in 84 cases relating to market manipulation and price rigging, which is a significant jump from 41 in FY15. SEBI has also started investigation in 9 cases of issue related to manipulations and 12 insider trading cases.
