2025 (8) TMI 813 - Board - SEBI

SEBI Bars Noticees for Fraudulent Price Manipulation, Freezes Rs. 11.37 Crore Illicit Gains Under PFUTP and RA Rules

The SEBI Board found that the Noticees engaged in a fraudulent and manipulative scheme violating the SEBI Act, PFUTP, and RA Regulations by artificially ... Fraudulent and manipulative scheme - unfair trade practices in violation of the SEBI Act, 1992, PFUTP Regulations, and RA Regulations - mischievous acts of Noticees - Sanjiv Bhasin/“Noticee No. 1” a director at IIFL Securities Limited, traded through a broker viz. RRB Master Securities Delhi Limited/Noticee No. 4/RRB Master” wherein he used to first buy securities himself, then used to recommend the same securities to the public on news channels like “Zee Business” and “ET Now”, and/or IIFL Telegram Channel, to buy the same securities. Once prices of securities increased after his recommendations, Sanjiv Bhasin used to sell the securities, thereby making a profit. Accordingly, Sanjiv Bhasin manipulated the price of securities and made ill-gotten gains. HELD THAT:- Conduct of Noticees cannot be said to be in conformity with the ethical standards and good faith dealings between Guest Expert and the investors. Investors who follow Guest Expert’s advice could not have believed that the recommendations are made not on the basis of research but on the basis of malafide intention of making profit in own accounts by increasing volume and price through the recommendations. The Noticees prima facie devised a manipulative practice which has been further corroborated by transcripts between the Noticee No. 1 and dealers while placing orders in the trading accounts of Profit Makers, the quantities of order placement matching with the exact number as being instructed by the Noticee No. 1. The connections amongst Noticees and a holistic examination of evidences available on record clearly shows that acts of Noticees can be termed as prima facie manipulative and unfair trade practices, apart from being fraudulent. Further, as shown earlier, there was prima facie regular profit sharing through cash channels between Sanjiv Bhasin and Lalit Bhasin. In view of the factual analysis and legal discussion so far in this order, we deem it appropriate to hold that there is a prima facie case of manipulative, fraudulent and unfair trade practice carried out by Noticees, which ultimately generated huge amount of unlawful gains (approximately ₹11.37 Crore) as discussed earlier, in accounts of Noticee Nos. 3, 5, 6 and 8 to 12. Noticee No. 1 has also violated provisions of sub-regulation (2) of regulation 16 and sub-regulation (2) of regulation 21 of the RA Regulations by sharing information related to the recommendations to be broadcasted on various Media Channels with the dealers of Noticee No. 4 and further instructed them to place contrary trades in respect of scrips recommended by him earlier, and made unfair profits. The acts carried out by Noticees in the instant matter and the manner in which they have been done, are, prima facie, in my view, in violation of the provisions of the SEBI Act, 1992, PFUTP Regulations and RA Regulations. It is a fit case to pass an interim ex parte order to insulate the securities market from the mischievous acts of Noticees and also to prevent these Noticees in conducting similar activities which are prima facie against the interest of investors as well as against the development of securities market. Further, there is an urgency to protect the unlawful gains from getting siphoned off beyond the regulatory reach. Further, this interim order would also send a message to the market participants that the regulator is watchful of all such unlawful activities and give an assurance to the investors. Noticee No. 1 is the Mastermind of the manipulative/fraudulent scheme, and all other Noticees have played different roles in the scheme, they shall be held liable jointly and severally for impounding the unlawful gains made as per Table 100 above. Given the aforesaid peculiar facts and circumstances of the case and legal principles enunciated by Hon’ble SAT in a number of cases, deem it appropriate to hold that Noticees shall be jointly and severally liable for the impounding of unlawful gains made by them as per the aforesaid Table. Interim order passed:- An amount of ₹11,37,19,170/- (Rupees eleven crores thirty-seven lacs nineteen thousand one hundred and seventy only), being the total amount of unlawful gains earned from the alleged violations, shall be impounded, jointly and severally in the manner as provided in Table 100 and Noticees are directed to open fixed deposit account(s) in a Scheduled Commercial Bank to credit/deposit jointly and severally the aforesaid amount of unlawful gains with a lien marked in favour of SEBI and the amount kept therein shall not be released without permission from SEBI. Noticee Nos. 1 to 3 and 5 to 12 are restrained from accessing the securities market and are further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly. The Noticee No. 4 is prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, in its proprietary account. The Noticee No. 1 shall preserve the records of his various social media accounts maintained by him, directly or indirectly, till further directions. Banks, where Noticee Nos. 1 to 12 are holding bank accounts, are directed that no debits shall be made, without permission of SEBI, in respect of the bank accounts held jointly or severally by Noticees, except for the purposes of transfer of funds to the fixed deposit account(s) as stipulated above. Depositories shall also be directed that no debit shall be made, without permission of SEBI, in respect of the demat accounts held by Noticees. However, credits, if any, into the accounts may be allowed. Further, this direction shall not apply to those demat accounts of the Noticee No. 4 which deal with clients’ securities, since the Noticee No. 4 is a stock broker registered with SEBI and deals with securities of clients. Banks and the Depositories are directed to ensure that all the aforesaid directions are strictly enforced and complied with. Noticees shall not dispose of or alienate any of their assets/properties, till such time, the amount of unlawful gains is credited to fixed deposit account(s) except with the prior permission of SEBI. Noticees are further directed to provide a full inventory of all their assets whether movable or immovable, or any interest or investment or charge in any of such assets, including property, details of all their bank accounts, demat accounts, holdings of shares/securities if held in physical form and mutual fund investments. ISSUES PRESENTED AND CONSIDERED 1. Whether there is a prima facie case that the conduct of the Guest Expert (Noticee No.1) and connected entities constituted manipulative, fraudulent and unfair trade practices in contravention of Section 12A of the SEBI Act, Regulations 3 and 4 of the PFUTP Regulations, and provisions of the RA Regulations. 2. Whether non-public/price-sensitive information about impending public recommendations was communicated or misused to create pre-recommendation positions and post-recommendation opposite trades, thereby attracting prohibition under Section 12A(e) of the SEBI Act and related PFUTP provisions. 3. Whether the Research Analyst / person making public recommendations violated Regulation 16(2) and Regulation 21(2) of the RA Regulations by dealing in recommended securities and failing to make required disclosures. 4. Whether dealers, trading member, advisors and the identified profit-maker entities aided, abetted or participated in the alleged scheme and thus are jointly and severally liable. 5. Whether, on the material collected, interim ex-parte relief (including impounding of alleged unlawful gains, market access restraints and preservation directions) is warranted under Sections 11, 11B and Regulation 11 of the PFUTP Regulations. 6. If interim relief is warranted, the quantum and apportionment of the amount to be impounded prima facie and the persons against whom directions ought to be issued. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Prima facie manipulation / fraud (SEBI Act §12A; PFUTP Regs 3 & 4) Legal framework: Sections 11, 11B and 12A SEBI Act; Regulations 3 and 4 PFUTP (prohibiting manipulative, deceptive, fraudulent and unfair trade practices); inclusive definition of 'fraud' under PFUTP Regulation 2. Precedent treatment: The Order relies upon and applies the guiding principles from Supreme Court and SAT jurisprudence recognizing market manipulation as interference with supply-demand, effecting artificial price/volume, and the need to protect market integrity (citing N. Narayanan, Rakhi Trading and SAT dictum on joint liability). The precedents are followed for purpose of assessing market-abuse and justifying interim measures. Interpretation and reasoning: The Investigating Authority assembled corroborative contemporaneous evidence - call / WhatsApp transcripts, CTCL/order logs, trade/price-volume charts, KYC and entity-ownership data, email/Telegram dissemination timing, client-dealer mappings and seized device data. The consistent pattern: (i) pre-recommendation accumulation in identified trading accounts via dealers; (ii) public recommendation by Guest Expert on media/communication platforms producing immediate surge in price/volume; (iii) near-immediate sell/square-off instructions to same dealers to liquidate positions; and (iv) mirror trades in dealers'/related persons' personal/associated accounts. Multiple illustrative instances (LTTS, PARAGMILK, INDIGO, SAIL, GODREJCP) provide replicable factual sequences with direct matching of call instructions to order entry times and executed trades. The activity satisfies PFUTP concepts of employing a scheme to defraud, deceptive conduct, inducing trading to artificially affect price/volume, and misuse of non-public information. Ratio vs. Obiter: Ratio - the facts establish prima facie manipulative and fraudulent conduct under Section 12A and Regulations 3 & 4 for purposes of interim action. Obiter - broader policy observations on investor trust and deterrence (though persuasive, not decisive for liability). Conclusions: Prima facie violation of Section 12A SEBI Act and Regulations 3 & 4 PFUTP by the Guest Expert and participating entities, warranting regulatory intervention. Issue 2 - Misuse/communication of non-public information (SEBI Act §12A(e)) Legal framework: Section 12A(e) (prohibits dealing while in possession of material/non-public information or communicating such information); call/CDR analysis; RA Regulations obligations for research analysts. Precedent treatment: Consistent with SEBI's supervisory approach and SAT/Supreme Court recognition that insider/NPI misuse and pre-public positioning can constitute market abuse; applied here to aggregated evidential facts. Interpretation and reasoning: Evidence shows advance clandestine placement of orders in accounts mapped to dealers and controlled/connected entities prior to public broadcast. Calls/WhatsApp demonstrate direct instruction to dealers before broadcast and direction to square-off immediately after broadcast; IIFL/Yobee/Telegram dissemination timestamps corroborate timing. Dealers and authorised signatories were privy to instructions and mirrored trades. This constitutes possession and transmission of material non-public information and its use to trade for profit, contrary to §12A(e). Ratio vs. Obiter: Ratio - prima facie NPI misuse established by temporal and transactional linkage; Obiter - discussion on technical modalities of NPI dissemination. Conclusions: Prima facie breach of §12A(e) by those who took positions on advance knowledge and those who received or acted on such information. Issue 3 - Research analyst / public recommender obligations (RA Regulations 16(2), 21(2)) Legal framework: Definition of 'research analyst' (Reg.2), limitation on trading by research analysts (Reg.16(2)), requirements for disclosures on public media (Reg.21(2)). Precedent treatment: The Regulations are applied strictly to prevent conflicts where research/recommendations are used to profit by the recommender or associates; the Order treats the Guest Expert as falling within the regulatory scope despite being engaged as consultant/guest. Interpretation and reasoning: The Guest Expert was associated with a registered Research Analyst entity and routinely gave buy/sell recommendations on media and IIFL platforms. Evidence shows he either instructed or placed trades through dealers before recommendations and sold after broadcast, without making required disclosures or observing blackout restrictions. Thus prima facie contravention of Reg.16(2) (dealing in recommended securities within prohibited window) and Reg.21(2) (failure to disclose status/financial interest when making public recommendations). Ratio vs. Obiter: Ratio - prima facie contraventions of RA Regulations by the recommender; Obiter - policy comments about reputation and investor reliance. Conclusions: Guest Expert prima facie violated RA Regulations; associated intermediaries and authorised persons who enabled the trades are implicated. Issue 4 - Liability of dealers, trading member, advisors, profit-makers; joint & several liability Legal framework: SEBI Act §11B (power to direct disgorgement), §27 (company officers' liability), PFUTP Regulation 4(2)(d) (inducing others to deal), and general principles of joint tortfeasor liability. Precedent treatment: SAT authority recognizing joint and several liability where actors combine in a common manipulative scheme is applied (SRSR Holdings v. SEBI). The Order follows that approach for prima facie allocation. Interpretation and reasoning: Ownership/control/shareholding analyses, client-dealer mapping, CTCL terminal assignments, call records, WhatsApp/chats, profit sheets, and evidence of fund transfers/meetings link advisors, promoters, dealers and profit-maker entities to coordinated conduct. Some directors/promoters acted as enablers by authorising trades in controlled entities and by permitting dealers to accept instructions from the Guest Expert. Dealers misused access to client trading information and mirrored trades for personal profit. The Accounts of profit-makers show concentrated trading through the trading member, consistent with facilitation. Given the common plan, joint and several liability is prima facie appropriate for impounding unjust gains. Ratio vs. Obiter: Ratio - prima facie joint and several responsibility of actors in the scheme for disgorgement/impounding; Obiter - on degrees of culpability among nominal directors where no evidence of active participation exists. Conclusions: Dealers, trading member and connected advisors/beneficiaries are prima facie joint tortfeasors and potentially liable for disgorgement/other regulatory directions. Issue 5 - Necessity and scope of interim ex-parte relief (impounding, market access restraints, preservation) Legal framework: SEBI Act §§11, 11B (interim directions/disgorgement), Regulation 11 PFUTP (interim measures), SEBI's power to protect investors and prevent dissipation of alleged unlawful gains pending inquiry. Precedent treatment: Prior SAT decisions and judicial guidance (e.g., Amalendu Mukherjee v. SEBI) endorse interim impounding to preserve assets and prevent frustration of eventual relief - relied upon and followed. Interpretation and reasoning: The Order finds urgency: (i) demonstrable, substantial alleged ill-gotten gains (aggregate ~Rs.11.37 Crore) traceable to matching trades; (ii) covert profit-sharing and cash/non-banking fund transfers between principal actors; (iii) risk of dissipation of proceeds if no interim restraint; (iv) strong public interest in market integrity and investor protection. Given the cogent prima facie evidence and difficulty in tracing funds across informal channels, an impounding direction by requiring fixed deposits with lien, market access restraints for identified persons, preservation of records and prohibition on debits/transfers (subject to permitted closings and settlement) is proportionate and necessary. Ratio vs. Obiter: Ratio - interim ex-parte directions are justified to preserve amounts and prevent dissipation pending adjudication; Obiter - broader statements on deterrence and investor education. Conclusions: Interim ex-parte measures (impounding of Rs.11,37,19,170 jointly and severally by named noticees; market access restraints; preservation and non-debit directions; limited exceptions for client funds and position square-offs) are warranted prima facie and proportionate. Issue 6 - Quantum and apportionment of impoundment; calculation methodology Legal framework: SEBI's disgorgement and disgorgement-adjacent powers under §11B (including the statutory explanation authorising disgorgement directions) and Regulation 11 PFUTP. Precedent treatment: SAT jurisprudence on joint tortfeasor apportionment and the use of prima facie calculations to determine interim impoundment is applied; the Order follows accepted practice of computing gains from matching trades for interim relief. Interpretation and reasoning: The Investigating Authority computed ill-gotten gains based on matching trades (pre-recommendation accumulation and post-recommendation square-off) across cash and derivatives, using exchange trade logs and executed prices. The aggregate amount of matching-trade gains identified is Rs.11,37,19,170. The Order apportions joint-and-several impounding based on role (mastermind, enablers, dealers, profit-makers) and the trading/ownership structure; the table sets out prima facie allocation for interim fixation (subject to final adjudication). Ratio vs. Obiter: Ratio - the amount identified is a reasoned prima facie computation for interim impounding; Obiter - detailed apportionment is provisional and subject to audit/defence at inquiry. Conclusions: The impounded quantum and the listed joint-and-several apportionment are justified on the evidence for interim preservation; final disgorgement and precise allocation remain subject to due process. OVERALL CONCLUSION On the preponderance of the collected factual and documentary material, the Court/Tribunal concluded there is a strong prima facie case that the Guest Expert and multiple connected persons: (i) created pre-public positions, (ii) induced market impact by public recommendations, (iii) directed opposite trades to monetise the induced movement, and (iv) shared and received proceeds - conduct amounting prima facie to manipulation, fraud and misuse of non-public information, and contravening RA Regulations. Interim ex-parte relief (impounding of identified unlawful gains, market access restraints and preservation directions) is warranted and proportional to protect investors and preserve assets pending adjudication; the findings and calculations are provisional and serve as the basis for issuance of show-cause directions and further proceedings.