Market regulator the Securities and Exchange Board of India (SEBI) has barred six entities from the markets for two years for indulging in manipulative trading in the shares of Biocon Ltd in the cash market.
Additionally, SEBI has imposed a penalty of Rs10 lakh each on Gangwal Sunil Kumar, Vihit Investment, Mohd Faisal, AKG Securities and Consultancy, Paramount Incorporation and Minesh Jormalbhai Mehta (collectively referred to as noticees). The penalty needs to be paid within 45 days.
SEBI had investigated trading activities of certain entities in the scrip of Biocon.
During the investigation, SEBI found that all the six entities had engaged in price manipulation in the scrip of Biocon at National Stock Exchange's (NSE's) cash market during the last half an hour on 29 June 2017 and managed to establish higher settlement price in the futures of Biocon.
It was observed from unique client code (UCC) details from BSE, off-market data from depositories, common directorship from MCA (ministry of corporate affairs) database and bank statements of noticees obtained from banks that Vipul Trivedi (partner of Paramount Incorporation) has one proprietorship firm named Sand Enterprises.
It was further observed that Sand Enterprises had financial transaction with Minesh Jormalbhai Mehta. In an email dated 13 November 2019, Sunil Kumar Gangwal stated that Minesh Mehta was casually known to him for around nine months. Further, he had availed a friendly loan from Minesh Mehta and the same was repaid. Sunil Kumar Gangwal stated that partners of Vihit Investment were known to him formally and a banking transaction between Ganjwal and Vihit Investment of Rs2.34 crore was carried out between 22 July 2019 to 15 October 2019. Both the financial transactions have been confirmed by Minesh Mehta in emails dated 16 September 2019 and 12 November 2019 and Vihit Investment’s emails dated 14 September 2019 and 13 November 2019.
It was observed that all the noticees indulged in intra-day trading since their buy and sale volumes were equal.
During the investigation period, the noticees bought and sold a total quantity of 12,82,300 shares of Biocon constituting 66.11% of the total traded volume in the scrip. All the six noticees appeared in the list of top 10 clients in the scrip of Biocon (in gross buy volume basis) during the investigation period. It was observed that 12,08,860 shares were traded amongst the six noticees contributing 62.33% to the total traded volume during the investigation period.
It was observed that the buy and sell trades of the noticees were concentrated in the last 30 minutes (especially at 15:22:14) of trading on 29 June 2017. It was observed that the trade volume of the noticees contributed 66.12% to the market traded volume in the last 30 minutes. Out of that, 94.27 of the trades were traded especially at 15:22:14 on 29 June 2017.
Thus, the noticees traded heavily on 29 June 2017 only during last half an hour and also they squared off all of their positions since the buy and sell volume of noticees were equal during the last half an hour which is the investigation period. Noticees have not traded a single share before 3pm on 29 June 2017.
All the six entities had engaged in price manipulation in the scrip of Biocon at NSE cash market during 15:00:00 hours to 15:30:00 hours on 29 June 2017 and managed to establish higher settlement price in the futures of Biocon.
On 29 June 2017, when Biocon finally closed at Rs332.15, they heavily traded in the scrip and created volume at higher prices during last half an hour to get a better future settlement price.
"Noticees have acted as a group and had entered into these trades in the cash segment for the purpose of securing a higher settlement price in the futures market where noticees no. 2, 3, 4 and 6 (Vihit Investment, Mohd Faisal, AKG Securities and Mehta) had taken long position in the last half an hour on June 29, 2017," SEBI noted.
SEBI added that these four entities had taken the long positions to increase their profit arising out of their long positions.
"... noticees acted in concert to manipulate the settlement price in order to enable noticees no. 2, 3, 4 and 6, to make wrongful gains from their long position in futures," the SEBI order said.
In addition, SEBI has directed these four entities to disgorge the unlawful gains made by them along with an interest of 12% per annum.
By indulging in such trades, all the six entities have violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms, SEBI noted.