SEBI bans nine entities for seven years over market manipulation through artificial price inflation schemes

SEBI found nine entities guilty of market manipulation in scrip trading during October 2012 to June 2013. The entities executed trades with connected parties, consistently buying at higher prices on subsequent days despite lower-priced shares being available, creating artificial price rises. SEBI determined this pattern was manipulative and fraudulent, violating PFUTP Regulations. The Board imposed seven-year market access bans on all nine entities, prohibiting them from buying, selling, or dealing in securities directly or indirectly, with existing securities holdings frozen during the restraint period.

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Issues Involved:
1. Whether the Noticees by trading with connected entities have manipulated the price in the scrip of TEL during the period October 18, 2012, to June 17, 2013Rs.
2. If the answer to issue No. 1 is affirmative, whether the Noticees have violated the provisions of PFUTP RegulationsRs.
3. If the answer to issue No. 2 is affirmative, what directions, if any, should be issued against the NoticeesRs.

Issue-Wise Detailed Analysis:

Issue No. 1: Whether the Noticees by trading with connected entities have manipulated the price in the scrip of TEL during the period October 18, 2012, to June 17, 2013Rs.

The investigation revealed that five Noticees (Radison Properties Private Limited, Natural Housing Private Limited, Topwell Properties Private Limited, South Asia Portfolios Private Limited, and Safed Sales Private Limited) were connected to each other and to the company, Turbotech Engineering Ltd. (TEL). Additionally, Janvi Tanvi Share Traders Private Limited, Kingfisher Properties Private Limited, Shivkhori Construction Private Limited, and Spice Merchant Private Limited were found to be connected to these five Noticees. The company issued 2,27,30,000 convertible equity warrants on a preferential basis to 14 allottees during 2009-2010, which were later converted into equity shares and transferred to 1,565 unique entities via off-market transfers.

The nine Noticees contributed significantly to the positive Last Traded Price (LTP) during the investigation period. The analysis showed that these Noticees executed trades with 295 connected entities, contributing Rs. 1161.70 (23.24% of market positive LTP) to the market's positive LTP. Kingfisher Properties Pvt. Ltd., for example, consistently bought shares at higher prices despite available lower-priced shares, indicating manipulative intent.

The cumulative effect of the connections among the Noticees, the trading pattern, the lack of company fundamentals, and the absence of any rational explanation from the Noticees led to the conclusion that they manipulated the price of the scrip by contributing to the price rise.

Issue No. 2: If the answer to issue No. 1 is affirmative, whether the Noticees have violated the provisions of PFUTP RegulationsRs.

The relevant provisions of PFUTP Regulations prohibit fraudulent and manipulative practices in securities trading. The trades executed by the nine Noticees with connected entities were found to be manipulative and fraudulent, creating a false or misleading appearance of trading in the securities market. Therefore, the Noticees violated Regulations 3(a), (b), (c), (d), and Regulations 4(1), 4(2)(a), and (e) of PFUTP Regulations.

Issue No. 3: If the answer to issue No. 2 is affirmative, what directions, if any, should be issued against the NoticeesRs.

Given the manipulative and fraudulent trades executed by the Noticees, SEBI deemed it necessary to issue appropriate directions to protect the interests of investors and maintain market integrity. The order restrained the nine Noticees from accessing the securities market for seven years and prohibited them from buying, selling, or dealing in securities, directly or indirectly, during this period. Their existing securities holdings were also ordered to remain frozen.

Order:

The order, effective immediately, restrains Radison Properties Private Limited, Natural Housing Private Limited, Topwell Properties Private Limited, South Asia Portfolios Private Limited, Kingfisher Properties Private Limited, Janvi Tanvi Share Traders Private Limited, Safed Sales Private Limited, Shivkhori Construction Private Limited, and Spice Merchants Private Limited from accessing the securities market for seven years and prohibits them from dealing in securities in any manner during this period. Compliance with this order is to be ensured by all recognized Stock Exchanges, Depositories, and the Registrar and Share Transfer Agents.

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