Sebi bans 28 entities for fraudulent trade via bulk SMSes that boosted trading volumes of Kalpa Commercial

New Delhi: Markets regulator Securities and Exchange Board of India (Sebi) has barred 28 entities from the capital markets for sending out unauthenticated short message services (SMSes). in bulk. with misleading 'buy' recommendations, to pump up trading volumes in the shares of Kalpa Commercial.

The order followed complaints from intermediaries alleging that some unknown entities were sending guaranteed return SMSes, thereby misguiding investors with unauthenticated SMSes.

Following this, Sebi conducted a preliminary probe into the share trading of Kalpa Commercial Ltd (KCL) during October 10-18, 2017, specifically in relation to bulk SMSes circulated with questionable recommendations with respect to trading in the firm's shares.

The probe found that 28 'connected entities' (group) had employed a scheme for offloading a large number of shares of KCL in a manipulative manner. They participated in the larger scheme of sending misleading 'buy' recommendations via over 3.42 crore bulk SMSes designed to create investor interest to buy those shares.

 Sebi bans 28 entities for fraudulent trade via bulk SMSes that boosted trading volumes of Kalpa Commercial

Sebi. Representational image. Pic courtesy: IBNLive

Once sufficient investor interest was created, the shares were sold by the participants of the group either directly or through a layer of off-market transfers, said Sebi.

"I prima facie find that by virtue of their dealings in the scrip of KCL, the connected entities along with Abhishek have acted in a fraudulent and deceitful manner wherein they devised a scheme to defraud unsuspecting investors through circulation of SMSes.... This attracts prohibitions enshrined in the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulation," Sebi Whole Time Member Madhabi Puri Buch said in an order dated 27 April.

Besides, the regulator is of the view that a detailed investigation of the entire scheme employed in this case is necessary to determine the detailed role of named entities and any other entity therein, detailed connection amongst the concerned entities and fund trails, among others.

Accordingly, Sebi has prohibited these 28 entities from the capital markets "till further directions". Also, the regulator has directed them "to cease and desist from directly or indirectly disseminating messages or news in any form related to the securities market, by any means whatsoever". These 28 entities included Abhishek Ashok, Tejas Abhirambhai Nathwani, Dhruv Trading Company and Topline Fabrics Pvt Ltd

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Updated Date: Apr 30, 2018 16:46:28 IST