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Sebi fines Scan Steels ₹ 18.8 lakh for fraudulent trading

January 24, 2020
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New Delhi, Jan 24 (PTI) Markets regulator Sebi has levied a penalty of ₹ 18.80 lakh on Scan Steels Ltd for indulging in fraudulent trading in the stock options segment of the BSE.

The matter pertains to a probe conducted by the regulator between April 2014 and September 2015 after observing large scale reversal of trades in stock options segment of the BSE by certain entities including Scan Steels that led to creation of artificial volume.

The probe found that the trades executed by the company "were not genuine trades and being non-genuine, created an appearance of artificial trading volumes" in the stock options contracts.

It further noted that Scan Steels has entered into 324 non-genuine transactions in 113 stock option contracts which demonstrates the repetitive nature of the default on its part and by executing such trades, the company violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms.

Consequently, the Securities and Exchange Board of India (Sebi), in an order passed on Thursday, imposed "a penalty of ₹ 18.80 lakh on the noticee viz Scan Steels Limited".

In a separate order on Friday, the regulator imposed a fine of ₹ 5 lakh on Viju Babulal Jain, one of the directors of Shivam Shree Business Ltd, for violating insider trading norms.

Sebi observed that from November 6, 2015, Jain started disposing of his shareholding and on November 27, 2015 the value of the disposed holding was over ₹ 14.47 lakh, thus exceeding ₹ 10 lakh.

Jain was required to make the disclosure to the company about the number of securities disposed of within two trading days. However, no such disclosure was made by him and thus violated the PIT (Prohibition of Insider Trading) norms.

Being one of the directors of the company, Jain was an insider who is not allowed to take opposite position of his own trades within six months of the transaction without getting explicit relaxation from the compliance officer with proper reason.

In this case, Jain bought and sold shares within six months without obtaining a proper reasoned relaxation from the compliance officer and made of profit of more than ₹ 1 lakh. By this, he violated the code of conduct adopted by the company for insider trading.

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