Sebi slaps Rs 1.62 cr penalty on 9 entities for fraudulent trading

Capital markets regulator Sebi on Friday slapped a penalty totalling Rs 1.62 crore on nine entities for indulging in fraudulent trading in the scrip of Sterling Green Woods Ltd.

The regulator levied a fine of Rs 18 lakh each on Radhe Krishna Broking, Harshad Panchal, Hemang Shah, Abhishek Soni, Umesh Patel, Sonal Patel, Dhaval Soni, Anurag Agarwal and Paksh Developers.

The Securities and Exchange Board of India (Sebi) had conducted an investigation into the alleged irregularity in trading in the scrip of Sterling Green Woods Ltd (SGWL) during April-July, 2009 period.

During the probe, it was found that the nine entities along with few others, collectively called Hemang Shah Group, were connected to each other and also related with SGWL, Sebi said in an order.

The Hemang Shah Group entities collectively bought and sold shares of SGWL and created artificial volume through fraudulent trades among themselves and increased the price of the scrips through first trades at higher price than previous day closing price.

They also rigged the price up by placing both buy and sell orders at higher price and accumulated the shares while creating artificial volume in the scrip during April-June, 2009, the order noted.

Further, the regulator observed that when the price of the scrip reached its highest level in July 2009, the entities sold off their shareholding in the month of July 2009.

The price was increased by the trades of Hemang Shah Group entities only, Sebi said.

The nine entities made a profit of Rs 54 lakh by creating artifical volume, rigging prices and selling shares in July 2009.

By doing so, they violated the provisions of Prohibition of Fraudulent and Unfair Trade Practices.

The entities had "acted hand in glove to create artificial volume in the scrip of SGWL and to manipulate the price of SGWL scrip during the investigation period", Sebi said.

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Thus, the entire modus operandi, including the profit/ loss must be viewed as a whole, and not per individual, the regulator said while imposing fine.