Sebi refuses to lift market ban on 19 entities for fraudulent trade via bulk SMSes

By: |
September 26, 2019 8:21 PM

Sebi noted that these 19 entities have "prima facie acted in a fraudulent and deceitful manner in the shares of KCL" which is in violation of PFTUP (Prohibition of Fraudulent and Unfair Trade Practices) norms

Sebi interest rate, SEBI derivatives, stock exchanges, the Securities and Exchange Board of India, mutual funds, fpiRegulator Sebi on Thursday refused to lift the capital market ban imposed on 19 entities for sending misleading SMSes in bulk to lure gullible investors to trade in the shares of Kalpa Commercial.

However, the watchdog has revoked the directions against five entities in the same case.

“The interim order has reasonably highlighted the modus operandi wherein a group of connected entities participated in the larger scheme of sending misleading bulk SMSes to lure innocent investors to trade in the scrip of KCL and subsequently offloaded their shareholding when the investor interest was created through false inducement,” Sebi said in its 84-page order.

“…prima facie there was a deliberate attempt to interfere with the free and fair operation of the securities market and to create artificial, false or misleading appearance in market through planted bulk SMSes and thereby increased the price and volume of shares of KCL,” it added.

Sebi noted that these 19 entities have “prima facie acted in a fraudulent and deceitful manner in the shares of KCL” which is in violation of PFTUP (Prohibition of Fraudulent and Unfair Trade Practices) norms and accordingly, the regulator confirmed the directions mentioned in the interim order passed in April 2018 against these entities.

The regulator, through an interim order in April 2018, prohibited a total of 28 entities from the capital markets “till further directions”. Also, the regulator had directed them “to cease and desist from directly or indirectly disseminating messages or news in any form related to the securities market, by any means whatsoever”.

The ruling had come following complaints from intermediaries alleging that some unknown entities were sending guaranteed returns SMSes, thereby misguiding investors.

Following this, Sebi had conducted a preliminary probe into the share trading of Kalpa Commercial Ltd (KCL) during October 10-18, 2017, specifically in relation to bulk SMSes circulated with questionable recommendations with respect to trading in the firm’s shares.

The probe had found that these 28 ‘connected entities’ (group) had employed a scheme for offloading a large number of shares of KCL in a manipulative manner. They participated in the larger scheme of sending misleading ‘buy’ recommendations via over 3.42 crore bulk SMSes designed to create investor interest to buy those shares.

Once sufficient investor interest was created, the shares were sold by the participants of the group either directly or through a layer of off-market transfers, Sebi noted.

Among the entities facing ban are Nature Infosoft Private Limited, Topline Fabrics Private Limited, Tushar Commodities Private Limited and Abhishek Ashoka.

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