Sebi on Tuesday slapped a total fine of Rs 75 lakh on 15 entities for indulging in fraudulent trading activities in the scrip of Timbor Home Ltd.
The regulator imposed a fine of Rs 5 lakh each on 13 individuals and two entities (noticees).
An investigation was conducted by Sebi in the scrip of the company during April 2014 to May 2015 period. It was found that from July 25, 2014, bulk SMSes were circulated with recommendations to buy the shares of the company.
Based on the timing of bulk SMSes circulation period, the investigation period was divided into pre-SMS circulation period (Patch 1) and post-SMS circulation (Patch 2).
According to the regulator, there was a spurt in traded volumes in the scrip soon after the day of circulation of bulk SMSes.
Prior to that, one of the noticees bought small quantities of shares in each transaction which contributed to an increase in the share price. Around the same time, the company’s promoters, including noticees, transferred shares to other connected entities through an off-market route.
During Patch I, it was found that five noticees on BSE and two noticees on NSE chose to place buy orders above the LTP (Last Traded Price) in small quantities despite the presence of large sell orders in the system, and continued this pattern of buying shares of the company.
Further, the regulator noted that the promoters of Timbor Home had sold their shares during the investigation period. The promoter shareholding had come down from 29.90 per cent in March 2014 to 2.93 per cent in December 2014 at the time when bulk SMSes were circulating recommending purchase of shares of the company.
Also, the promoter holding reduced to 0.29 per cent in June 2015 and requisite disclosures were not made by the promoters while disposing of their holding in the company.
The objective of the fraudulent scheme was to artificially inflate the price of shares of Timbor Home by using connected entities, circulate bulk SMSes through one of the noticees who was connected to the promoters of the company.
Thereafter, dump the shares of the promoters through a large set of connected entities post circulation of bulk SMSes to get rid of their shares before the company went into liquidation and the value of their shares became meagre or nil, Sebi said.
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