 "Sebi sends tough message to secondary market manipulators")
A source said interim orders in secondary market manipulation cases have increased in 2014 significantly. “All these has become possible after improved surveillance system was introduced,” said the source.
Sebi has set up Data Warehousing and Business Intelligence System (DWBIS) which comprise of data warehouse, data mining and business intelligence tools. The Sebi has set up the Statistical Analytics Group to scientifically supplement the investigation and surveillance functions. DWBIS is using the concepts of Geometric Brownian Motion. This is a mathematical approach for stock price modelling. DWBIS throws around 100 alerts daily to signal some unusual movements have happened in certain scrips and analysis include pre- and post-corporate announcement price and volumes traded in that share along with many other movements.
The regulator has already found hundreds of entities involved in money laundering, using some listed companies as a front. More than 50 such companies are under investigation. About 400 prohibitory orders have already been issued. Even in two cases, global depository receipts frauds were detected, where either that fund raised abroad is siphoned off or used to buy assets which were later not shown in the balance sheet of the company concerned. These companies include Transgene Biotek and Cals Refineries.
In another case, misuse of P-notes was found, when an overseas investor shorted in a scrip in the F&O segment hours before the board of that company was meeting for deciding price for its offer for sale (OFS). He managed to get inside information that the OFS price would be significantly lower than the market price. When after announcement on the next day, the price fell and he booked profit in his short sale and invested in that OFS by way of P-notes through three foreign institutional investors to hide his identity as a cover to hide insider trading. However, alerts by the new surveillance system helped Sebi to crack insider trading.
“In coming months, several cases of insider trading are expected to go up once the new regulations will become operative when surveillance alerts will be useful,” said an official in the know.
Sebi had recently issued prohibitory orders in the cases of four companies covering over 400 parties for using exchange platform for laundering money. The regulator has asked exchanges also to look into this and the exchanges have also put some companies under watch.