Stock Exchange System cannot be used to achieve unlawful benefits: SEBI
Updated: Jun 30, 2015 12:50:10pm
Mumbai, June 30 (KNN) The market watchdog Securities and Exchange Board of India (SEBI) has strongly moved against four companies listed on the BSE SME platform and said that based on the findings, prima facie appears that certain market manipulations are taking place in the scrips of four companies.
“In my view, the stock exchange system cannot be permitted to be used to achieve unlawful benefits whether tax related or otherwise,” SEBI said in its Order.
Sebi's investigations have revealed certain entities manipulated the share price of their companies to launder money. The regulator has barred a total of 239 persons / entities, including the four companies, from accessing the market.
The four companies are - Eco Friendly Food Processing Park Limited; Esteem Bio Organic Food Processing Limited; Channel Nine Entertainment Limited; and HPC Biosciences Limited.
The first three are involved in agricultural businesses, while the fourth is a production and distribution company for serials, films and events. The companies were listed on the BSE between January and March 2013.
“SEBI noticed huge rise in the traded volumes and prices of these scrips during the period from January 01, 2013 to December 31, 2014 and in this background undertook a preliminary inquiry in the dealings in the aforesaid scrips,” the order said.
It was noticed in the preliminary inquiry that the price of all these scrips increased astronomically during the period from the date of listing of the said scrips till December 31, 2014.
The price of the scrip of Eco rose by 6,265 per cent (approx. 64 times) during the period January 14, 2013 to December 31, 2014 within a span of 234 trading days; price of the scrip of Esteem rose by 3,150 per cent approx. 32 times) during the period February 07, 2013 to December 31, 2014 within a span of 244 trading days; price of the scrip of CNE rose by 2,882 per cent (approx. 30 times)during the period March 12, 2013 to December 31, 2014 in a span of 225 trading days; and price of the scrip of HPC rose by 1,782 percent (approx. 19 times) during the period March 19, 2013 to December 31, 2014 in a span of 252 trading days.
"I am of the considered view that the schemes, plan, device and artifice employed in this case, apart from being a possible case of money-laundering or tax evasion, which could be seen by the concerned law enforcement agencies separately, is prima facie also a fraud in the securities market," SEBI order said.
Entities bid up the shares of the companies to convert black money into white, according to the Sebi order. The total profit earned by the entities involved is pegged at Rs 468.99 crore. The ban comes into force with immediate effect. The barred entities can file objections within 21 days.
From the analysis of these bank statements, the market watchdog observed that all these companies had, immediately, after receipt of subscription monies transferred substantial amount from the respective IPO proceeds to other entities.
SEBI was of the opinion that the transactions in the said scrips were with a premeditated understanding, plan, device or artifice. In the present matter, once the shares of these companies got listed in SME segment of BSE, the Trading Group entities manipulated the price/volume of the scrips and then provided profitable exit to preferential allottees and Pre IPO transferees. Moreover, in any market, a sudden supply if not matched by similar demand leads to price fall.
Considering the same, any rational investor would not have dumped a large number of shares without facing the risk of a significant price fall until and unless he was sure of the demand side absorbing the supply. In this case, the entities of Trading Group created the demand against the supply from the preferential allottees/pre IPO transferees, SEBI order said.
In the whole process, the principle of price discovery was kept aside and the market lost its purpose. It is evident from the above analysis that the Trading Group entities provided a hugely profitable exit to the preferential allottees and pre IPO transferees, it added. (KNN Bureau)
“In my view, the stock exchange system cannot be permitted to be used to achieve unlawful benefits whether tax related or otherwise,” SEBI said in its Order.
Sebi's investigations have revealed certain entities manipulated the share price of their companies to launder money. The regulator has barred a total of 239 persons / entities, including the four companies, from accessing the market.
The four companies are - Eco Friendly Food Processing Park Limited; Esteem Bio Organic Food Processing Limited; Channel Nine Entertainment Limited; and HPC Biosciences Limited.
The first three are involved in agricultural businesses, while the fourth is a production and distribution company for serials, films and events. The companies were listed on the BSE between January and March 2013.
“SEBI noticed huge rise in the traded volumes and prices of these scrips during the period from January 01, 2013 to December 31, 2014 and in this background undertook a preliminary inquiry in the dealings in the aforesaid scrips,” the order said.
It was noticed in the preliminary inquiry that the price of all these scrips increased astronomically during the period from the date of listing of the said scrips till December 31, 2014.
The price of the scrip of Eco rose by 6,265 per cent (approx. 64 times) during the period January 14, 2013 to December 31, 2014 within a span of 234 trading days; price of the scrip of Esteem rose by 3,150 per cent approx. 32 times) during the period February 07, 2013 to December 31, 2014 within a span of 244 trading days; price of the scrip of CNE rose by 2,882 per cent (approx. 30 times)during the period March 12, 2013 to December 31, 2014 in a span of 225 trading days; and price of the scrip of HPC rose by 1,782 percent (approx. 19 times) during the period March 19, 2013 to December 31, 2014 in a span of 252 trading days.
"I am of the considered view that the schemes, plan, device and artifice employed in this case, apart from being a possible case of money-laundering or tax evasion, which could be seen by the concerned law enforcement agencies separately, is prima facie also a fraud in the securities market," SEBI order said.
Entities bid up the shares of the companies to convert black money into white, according to the Sebi order. The total profit earned by the entities involved is pegged at Rs 468.99 crore. The ban comes into force with immediate effect. The barred entities can file objections within 21 days.
From the analysis of these bank statements, the market watchdog observed that all these companies had, immediately, after receipt of subscription monies transferred substantial amount from the respective IPO proceeds to other entities.
SEBI was of the opinion that the transactions in the said scrips were with a premeditated understanding, plan, device or artifice. In the present matter, once the shares of these companies got listed in SME segment of BSE, the Trading Group entities manipulated the price/volume of the scrips and then provided profitable exit to preferential allottees and Pre IPO transferees. Moreover, in any market, a sudden supply if not matched by similar demand leads to price fall.
Considering the same, any rational investor would not have dumped a large number of shares without facing the risk of a significant price fall until and unless he was sure of the demand side absorbing the supply. In this case, the entities of Trading Group created the demand against the supply from the preferential allottees/pre IPO transferees, SEBI order said.
In the whole process, the principle of price discovery was kept aside and the market lost its purpose. It is evident from the above analysis that the Trading Group entities provided a hugely profitable exit to the preferential allottees and pre IPO transferees, it added. (KNN Bureau)
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