Securities Appellate Tribunal has set aside a Sebi order against Yes Investments and Blue Peacock Securities, who were fined a total of Rs 4 crore for indulging in fraudulent activities while dealing in securities.
Investigation conducted by Securities and Exchange Board of India (Sebi) had revealed, among others, that Yes Investments and Blue Peacock Securities allegedly created a false impression of artificial demand in the scrips by placing buy orders with large quantities below the market price.
In two similarly-worded orders dated August 27, 2014, Sebi had held that "the charges leveled against the noticee are proved and that the allegation of violation of provisions of... PFUTP ((Prohibition of Fraudulent and Unfair Trade Practices) Regulations by the noticee stand established".
Following the order, the firms separately approached the tribunal to set aside the order.
Yes Investments said that a similar order was passed by Sebi against its proprietor Vishal Kishore Bhatia in 2011 under similar circumstances and the regulator did not find the case fit for imposing penalty.
It noted, that decision of Sebi was neither placed before the Adjudicating Officer while passing the ruling in the present case and was nor considered by the Adjudicating Officer.
Accordingly, the tribunal quashed and set aside the impugned order passed by the regulator in 2014 and restored the matter to the file of Adjudicating Officer of Sebi for passing fresh order on merits and in accordance with law.
Citing the ruling given in the matter of Yes Investments, Blue Peacock Securities also appealed the tribunal to set aside the order against it.
Likewise, SAT set aside the Sebi order against Blue Peacock on similar grounds.
Sebi had found that between July 1, 2009 and December 31, 2010, the intention of two entities "of placing buy orders away from the prevailing market prices was not for genuine trading but only for artificially enhancing levels of demand, which constitutes a manipulative practice in the market".
They had also sold shares in the market at the time when its large buy orders at below the prevailing market price were pending and subsequently canceling these buy orders prior to conducting majority of the buying activity.
The entities were allegedly found to be "involved in BAIT and SWITCH activity" that is they had entered buy/sell orders lower/ higher than the market price, fully disclosed the orders but actually transacted on the opposite side in the market, across various scrips and for several days.
Further, they had allegedly "manipulated the order book" by giving false impression in the market about the demand and supply of various scrips and as a result misled the investors.
Accordingly a penalty of Rs 2 crore was imposed each on Yes Investments and Blue Peacock Securities.
The investigation by the regulator was initiated following alerts by the National Stock Exchange (NSE).
