Capital market regulator Sebi today slapped a fine of Rs 25 lakh on Crosseas Capital Services for fraudulent trading activities as a stock broker in shares of Ess Dee Aluminum Ltd (EAL).
A Securities and Exchange Board of India (Sebi) probe found that Crosseas Capital Services had executed self trades on its own account (proprietary trades) leading to false and misleading appearance of trading of the scrip of EAL during the period September 1, 2012 to June 30, 2013.
In a ruling today, Sebi said: "It can be concluded that the self trades executed by noticee in such high volume on numerous instances has created artificial volume in the scrip resulting in false and misleading appearance of trading in the scrip and thereby violated...PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations".
Additionally, Crosseas Capital had also failed to comply with regulations for stock brokers.
Consequently, the regulator has imposed "a consolidated penalty of Rs 25 lakh on Crosseas Capital Services Pvt Ltd".
Sebi observed in its order that "a registered intermediary such as the noticee should have appropriate systems to ensure that unfair market practices like self trades/fictitious trades in such high volumes should not take place from its own terminals".
Further, it noted that the Algo trading software used by the broker "should have appropriate checks and balances and has to be within the regulatory parameters to ensure that it complies with the full regulatory framework, including not resulting into/avoidance of self trades".
Sebi had conducted an investigation into the trading in the scrip of EAL and found that that its scrip rose from Rs 116.85 to a high of Rs 617 and closed at Rs 507.75 during the investigation period (September 1, 2012 to June 30, 2013).
