Sebi bars Global Securities, 12 others from capital markets for fraudulent trading

NEW DELHI: Regulator Sebi has barred Global Securities Ltd (GSL) and 12 individuals from securities market for up to one year for indulging in fraudulent trading activities. The restrain has been imposed for a period ranging from three months to one year, according to a Sebi order.

Sebi had initiated investigation into trading of shares of GSL after receiving reference from the Income Tax Department.

The company was part of a list of 84 companies, referred by the Income Tax Department, whose share prices were alleged to have been rigged by operators or their affiliates for providing Long Term Capital Gains Tax (LTCG), Short Term Capital Loss advantage to certain clients of the operators.

It was found that GSL had in October 2010 come out with preferential allotment which turned out to be a sham.

It was found to have been done not for genuine capital raising exercise, but to issue shares to a group of entities that were connected with each other or the company or another group of connected entities by way of common address or common directors, the order said.

The shares allotted to the preferential allottees were found to have been traded in the market by the connected entities after dematerialisation, the regulator said in an order passed on Tuesday.

Further, Sebi observed that the share price of GSL rose from Rs 11 to Rs 151 during March 16, 2012 to March 1, 2013 and then fell to Rs 6.34 from Rs 148.95 between March 2, 2014 and April 30, 2014.

This entire movement in price was not supported by any significant corporate announcement or any tectonic appreciation or depreciation in the financial parameters of the company, Sebi said.

In both the patches of price rise and price fall, the individuals who were connected entities and directly or indirectly connected with the company, traded and contributed to the positive and negative increase in the scrip price, the regulator said.

By doing so, they violated the provisions of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) norms.

Sebi said GSL violated PFUTP Regulations by employing preferential allotment as a device to ultimately defraud the investors dealing in securities.

Accordingly, the regulator restrained GSL and an individual -- Devesh Upadhyay -- from accessing the securities market in any manner whatsoever and further prohibited them from buying, selling or otherwise dealing in securities, directly or indirectly, for a period of one year.

Further, nine individuals have been prohibited from the capital markets for six months, while two others have been restrained for three months.