Sebi slaps Rs 50 lakh penalty on broker for fraudulent trade practices in BSE stock options

Markets regulator Sebi has slapped a penalty of Rs 50 lakh on broker Mangal Mantri Trading for indulging in fraudulent trade practices in illiquid stock options on BSE. After observing a large-scale reversal of trades in the bourse's stock options segment, Sebi conducted a probe into the trading activity in illiquid stock options on the BSE from April 2014 to September 2015.

From the trading pattern, Sebi noted that 81.38 per cent of all the trades executed in stock options of the exchange were non-genuine and Mangal Mantri Trading was among the entities that executed manipulative reversal trades, thereby creating misleading impression of trading.

By engaging in such trades, the firm violated PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations, the Securities and Exchange Board of India (Sebi) said in an order dated March 29.

The fact that the entity was a broker makes this act a very serious violation, warranting a higher penalty, the regulator noted.

Accordingly, a penalty of Rs 50 lakh was imposed on the firm.

The orders are in accordance with Sebi's announcement in April 2018 to take action in a phased manner against 14,720 entities for fraudulent trade in the illiquid stock options segment.

In a separate order, Sebi imposed a total fine of Rs 44 lakh on nine entities for manipulating share price of Shree Hanuman Sugar & Industries by placing orders higher than the last traded price (LTP).

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Chandrakant Tibrawalla, Umang Kamlesh Vora, Wealthsmith Share Broking Pvt Ltd among others are the entities facing action by Sebi.