Markets regulator Sebi today disposed of cases against GKN Securities and OPG Securities in a matter related to alleged fraudulent trading in the shares of Ujaas Energy.
The Securities and exchange Board of India (Sebi) had conducted an investigation during October 20-31, 2011 in the shares of Ujaas Energy, which got listed on BSE and NSE on October 20, 2011.
Among others, Sebi had observed that on the listing day total traded volume in the shares of UEL was 2,65,21,140 on BSE and 3,50,64,653 on NSE.
It was alleged that GKN had violated PFUTP and Broker Regulations by entering into self-trades repeatedly from a proprietary trading account on NSE in the shares of Ujaas Energy.
On BSE, it had entered into self-trades while trading through its broker OPG and created artificial volume in the shares of Ujaas Energy, leading to false and misleading appearance of trading in the securities market.
The allegation against OPG was that it had violated Broker Regulations by failing to exercise due skill and care while acting as broker and counterparty broker for self-trades of GKN.
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Self-trade, in market parlance, refers to a transaction in which the same entity takes both sides of the trade resulting into no change in beneficial ownership.
In an order, Sebi said GKN has executed self-trades on all seven trading days of the investigation period and the percentage of self-traded volume to total market volume traded on NSE and BSE is seemingly "minuscule" on these seven days.
"Further, the percentage of self-trade volume of the noticee (GKN) to the total traded market volume on NSE and BSE during the investigation period was only 0.3904 per cent and 0.3776 per cent, respectively, which is minuscule," Sebi said.
"... the percentage contribution as mentioned above does not suggest possibility of any manipulative intent to the extent of creating artificial volume in Ujaas Energy during the period of investigation," it added.
Noting that it is difficult to conclude that self-trades of GKN in the shares of Ujaas Energy were intentional and manipulative, Sebi disposed of the allegations of violation PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations and Broker Regulations against it.
In a separate order, Sebi said since it is not established that GKN had entered into self-trades repetitively to create artificial volume in the shares of Ujaas Energy, there is no case to draw any adverse inference on OPG as regards its role on exercise of due skill and care under the Broker Regulations.