1,018 entities​​​ involved in manipulation of illiquid stock opt for Sebi's one-time settlement scheme

The Securities and Exchange Board of India (Sebi) on Friday said about 1,018 entities who were allegedly involved in the manipulation of illiquid stock options, have opted for its one-time settlement scheme.

The regulator settled cases after entities paid settlement charges ranging between Rs 5 lakh to Rs 42 lakh.

Sebi had come across several instances wherein a set of entities were trading in options of individual stocks listed on the BSE.

Trading by these entities appeared to be abnormal because they were consistently seen to be making significant losses through their trades, which were reversed with the same counterparties either on the same day or the next day, the regulator said.

The Sebi analysis was done during the period April 1,2014 to September 30,2015.

“It was further observed that out of 21,652 entities that executed trades on the BSE Stock Options Segment, a total of 14,720 entities were involved in generation of artificial volumes by executing non-genuine/reversal trades on the same day..,”Sebi said.

The regulator had initiated adjudication proceedings against 14,720 entities.

Subsequently, some of the entities moved the Securities Appellate Tribunal(SAT) against the Sebi orders. During the hearing of one of the cases, SAT observed that Sebi could consider holding a Lok Adalat or adopting any other alternative dispute resolution process with regard to the illiquid stock options.

In this backdrop, Sebi introduced a settlement scheme to provide a onetime opportunity to the entities against whom adjudication proceedings were approved to settle the said pending proceedings.

The Scheme was initially kept open for a period of three months starting from August 01, 2020 to October 31, 2020. Subsequently, Sebi extended the period of the Scheme till December 31, 2020 to enable the entities to avail the benefit of the scheme in view of the disruptions caused due to the Covid-19 pandemic.