Illiquid stock options: Sebi imposes Rs 17 lakh fine on 2 entities for fraudulent trade

Markets regulator Sebi Tuesday imposed a total fine of Rs 17 lakh on two entities for executing fraudulent trades in the illiquid stock options segment on the BSE. The two entities, Dippy Investments Pvt Ltd, Dhan Stock and Share Brokers Pvt Ltd were fined Rs 12 lakh and Rs 5 lakh, respectively as per Sebi’s separate orders.

After observing large-scale reversal of trades in the BSE’s stock options segment, the regulator conducted an investigation in the trading activity in illiquid stock options on the exchange from April 2014 to September 2015. The investigation showed that the two were among the various entities that executed non-genuine trades in the stock options segment by reversing trades with same entities on the same day with wide variations in price.

“It is clear that by indulging in such execution of non-genuine trades, Noticee created a misleading impression of trading in said stock option contracts in a fraudulent manner, and thereby, it violated… PFUTP Regulations,” Sebi said for two entities in separate but similarly-worded orders.

Subsequently, Sebi imposed a penalty on two entities. In a separate order, Sebi imposed a fine of Rs 8 lakh on stock broker, Marwadi Shares and Finance Ltd for failing to settle clients’ account. “The Noticee (Marwadi Shares) failed to settle the said clients’ funds as per law” and thereby violated the Stock Brokers and Sub-Brokers Regulations, the regulator said.

Securities and Exchange Board of India ( SEBI )