Regulation 4 - Prohibition of manipulative, fraudulent and unfair trade practices - Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003

4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. 4 [ Explanation . For the removal of doubts, it is clarified that any act of diversion, misutilisation or siphoning off of assets or earnings of a company whose securities are listed or any concealment of such act or any device, scheme or artifice to manipulate the books of accounts or financial statement of such a company that would directly or indirectly manipulate the price of securities of that company shall be and shall always be deemed to have been considered as manipulative, fraudulent and an unfair trade practice in the securities market. ] (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:- (a) indulging in an act which creates false or misleading appearance of trading in the securities market; (b) dealing in a security not intended to effect transfer of beneficial ownership but intended to operate only as a device to inflate, depress or cause fluctuations in the price of such security for wrongful gain or avoidance of loss; (c) advancing or agreeing to advance any money to any person thereby inducing any other person to offer to buy any security in any issue only with the intention of securing the minimum subscription to such issue; (d) paying, offering or agreeing to pay or offer, directly or indirectly, to any person any money or money s worth for inducing such person for dealing in any security with the object of inflating, depressing, maintaining or causing fluctuation in the price of such security; (e) any act or omission amounting to manipulation of the price of a security; (f) publishing or causing to publish or reporting or causing to report by a person dealing in securities any information which is not true or which he does not believe to be true prior to or in the course of dealing in securities; (g) entering into a transaction in securities without intention of performing it or without intention of change of ownership of such security; (h) selling, dealing or pledging of stolen or counterfeit security whether in physical or dematerialized form; (i) an intermediary promising a certain price in respect of buying or selling of a security to a client and waiting till a discrepancy arises in the price of such security and retaining the difference in prices as profit for himself; (j) an intermediary providing his clients with such information relating to a security as cannot be verified by the clients before their dealing in such security; 5 [ (k) disseminating information or advice through any media, whether physical or digital, which the disseminator knows to be false or misleading in a reckless or careless manner and which is designed to, or likely to influence the decision of investors dealing in securities; ] (l) an intermediary reporting trading transactions to his clients entered into on their behalf in an inflated manner in order to increase his commission and brokerage; (m) an intermediary not disclosing to his client transactions entered into on his behalf including taking an option position; (n) circular transactions in respect of a security entered into between intermediaries in order to increase commission to provide a false appearance of trading in such security or to inflate, depress or cause fluctuations in the price of such security; (o) encouraging the clients by an intermediary to deal in securities solely with the object of enhancing his brokerage or commission; (p) an intermediary predating or otherwise falsifying records such as contract notes. (q) an intermediary buying or selling securities in advance of a substantial client order or whereby a futures or option position is taken about an impending transaction in the same or related futures or options contract. (r) planting false or misleading news which may induce sale or purchase of securities. 1 [ (s) mis-selling of units of a mutual fund scheme; Explanation.- For the purpose of this clause, mis-selling means sale of units of a mutual fund scheme by any person, directly or indirectly, by─ (i) making a false or misleading statement, or (ii) concealing or omitting material facts of the scheme, or (iii)concealing the associated risk factors of the scheme, or (iv) not taking reasonable care to ensure suitability of the scheme to the buyer.] 2 [(t) illegal mobilization of funds by sponsoring or causing to be sponsored or carrying on or causing to be carried on any collective investment scheme by any person.] 3 [Explanation. For the purposes of this sub-regulation, for the removal of doubts, it is clarified that the acts or omissions listed in this sub-regulation are not exhaustive and that an act or omission is prohibited if it falls within the purview of regulation 3, notwithstanding that it is not included in this sub-regulation or is described as being committed only by a certain category of persons in this sub-regulation.] ************ 1 Inserted by the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2012 w.e.f. December 11, 2012. 2 Inserted by the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2013 w.e.f. September 6, 2013. 3 Inserted by the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) (Amendment) Regulations, 2013 w.e.f. September 6, 2013. 4. Inserted vide Notification No. SEBI/LAD-NRO/GN/2020/36 dated 19-10-2020 5. Substituted vide Notification No. SEBI/LAD-NRO/GN/2022/71 dated 25-01-2022 before it was read as (k) an advertisement that is misleading or that contains information in a distorted manner and which may influence the decision of the investors;