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Registration of Stock Trader Cancelled by SEBI due to Fraudulent Trading

Registration Cancelled by SEBI
SEBI, on Wednesday, 8th July 2020, terminated the registration of a stockbroker for involvement in fraudulent trading activities in the scrip of Maharashtra Polybutenes Ltd. Capital Market Regulator Securities and Exchange Board of India (SEBI), in the order released, said that it was canceling the certificate of registration given to the noticee namely Vishal Vijay Shah as a stockbroker. It was reported that Shah had entered into a circular and synchronized exchange with 115 front organizations in the scrip of Maharashtra Polybutenes, which led to the creation of a fake or deceptive impression of trading in otherwise illiquid scrip. In June 2015, the watchdog named the Designated Authority (DA) to review the infringements reported against the noticee and sent the inquiry report dated 31st May 2017 to the Designated Member.

It was observed that there were three instances of first-level circular transactions beginning from the shares issued to Shah by the promoter of Maharashtra Polybutenes. SEBI stated, “Also, the trade cycles were continued by him and in total, Shah had transferred shares to 115 front entities and bought from the same entities thereby creating an artificial volume of 24 lakh shares by way of circular trades.” “These entities sold the shares received from Shah in the securities market and Shah had repeatedly traded with the same set of entities in a circular and synchronized manner”, it further added. 

According to the regulator, Shah and other relevant companies have dishonestly handled the business by entering into deals that were not legitimate, resulting in a false nature of trading and artificial price manipulation. It further stated that Shah had given incorrect orders to the clearinghouse in a large number of buy transactions for direct payment to 92 front entities who did not trade on the respective trade dates for 16 lakh shares, which were highly irregular. The regulator noted that Shah had not provided a satisfactory explanation for the transfer of shares from third parties to individuals or third parties other than customers, considering that the same quantity of shares had been retrieved after the payment duty of others had been honored. In September 2015, SEBI imposed a monetary penalty of Rs 15 lakh on the noticee for failing to comply with the summons issued by the investigating authority. As regards the plea for leniency in lieu of that order, SEBI Whole Time Member G Mahalingam claimed in the order of Wednesday that the infringements committed by the notice are severe and do not warrant any leniency. “I am, therefore, not inclined to accept the noticee's plea.” He stated. Noting that it was the duty of the stockbroker to ensure that the shares were transferred to the related clients and not to third parties, SEBI stated that Shah's conduct as a stockbroker in this case displayed a total lack of expertise, care, and diligence. 

The Securities and Exchange Board of India (SEBI) is a securities and commodity sector regulator in India owned by the Government of India. It was established in 1992 and given statutory powers on 12th April 1992 by means of the SEBI Act, 1992.

 

 


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