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Tribunal alters penalties for SEBI regulation breaches, citing lack of evidence and scrip liquidity. The Tribunal modified the direction imposing penalties on 16 entities for violating SEBI regulations related to trading in a specific scrip. Despite prima ...
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Tribunal alters penalties for SEBI regulation breaches, citing lack of evidence and scrip liquidity.
The Tribunal modified the direction imposing penalties on 16 entities for violating SEBI regulations related to trading in a specific scrip. Despite prima facie violations, penalties were deemed unwarranted due to lack of concrete evidence and the liquidity of the scrip. The appellants were cautioned against engaging in similar trading practices in the future, emphasizing compliance with securities regulations.
Issues: Challenging SEBI order imposing penalties for violating PFUTP Regulations.
Analysis: 1. The appeals were filed challenging the SEBI order dated November 30, 2017, penalizing 16 entities for violating SEBI regulations. Penalties ranged from Rs. 5 lakh to Rs. 10 lakh under section 15HA of the SEBI Act, 1992.
2. The investigation focused on trading in the scrip of M/s. Aarya Global Shares and Securities Ltd. by 16 connected entities, contributing to positive Last Traded Price Variation (LTPV) and New High Price (NHP) in violation of PFUTP Regulations.
3. The adjudication process involved two Adjudicating Officers, with a common show cause notice issued to the noticees. Personal hearings were granted, and the impugned order was passed on November 30, 2017, after considering replies and statements.
4. The appellant raised objections regarding substantial delay in proceedings, citing a similar case precedent. Allegations of a malicious investigation were made, questioning the evidence against the appellants.
5. The appellant argued that the impugned order did not consider stock split impact or continued price and volume increase, making it unsustainable. The individual contributions of appellants to LTP and NHP were deemed negligible.
6. Distinctions were sought in the appellants' roles, contending they traded like regular investors, and their relationship or living arrangements should not imply guilt.
7. SEBI contended that the appellants traded amongst themselves to create artificial LTPs, NHPs, and first trades, violating PFUTP Regulations. The appellants' replies were deemed inadequate, and their trading patterns were seen as manipulative.
8. The Tribunal found no merit in the delay objections, noting ongoing investigations and changes in the Adjudicating Officer. Actions against a minor were not warranted, and while trading patterns suggested manipulation, no evidence of collusive motive or fund transfers was found.
9. Despite prima facie violations, considering the liquidity of the scrip and absence of concrete evidence, the Tribunal concluded that penalties were unwarranted. The appellants were warned against similar trading practices in the future.
10. The direction imposing penalties was modified, and the appeals were disposed of with a warning to the appellants, emphasizing the importance of adhering to securities regulations.
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