The Hindu Business Line : Shankar Sharma, wife behind fictitious trading: SAT

Mumbai, Oct. 28 Synchronised trading is a form of stock manipulation where the similar and opposite buy and the sell orders are put into the system at almost the same time, in order to increase volumes.

SAT said in its Wednesday’s order: “We have no hesitation to hold that these trades were fictitious as there was no change in the beneficial ownership of the shares traded and it was the appellant on both sides of the trade. How can a person buy from himself and sell to himself? Such trades are only meant to create artificial volumes and they disturb the market equilibrium.”

The appellant executed fictitious trades by taking opposite positions, which are not permissible, it said.

“The sub-broker (Vruddhi) is no other than the appellant (Sharma) himself. It is true that the broker and sub-broker are companies but when we lift the veil it is the appellant (Sharma) and his wife who are lurking behind the curtain.”

The counsel for Mr Sharma argued that SEBI had not investigated the trading data relied upon in its 2008 show-cause notice. SAT said it did not find any merit in this contention.

“It is not necessary that the Board (SEBI) must conduct investigations in every case. In case the Board has enough material with it to issue a show-cause notice, it would be justified in doing so, and the investigations are only meant to find facts and collect data for proceeding against the delinquent.”

The second contention of the counsel was that the appellant was being penalised again for a charge that he, the broker and the sub-broker had been show-caused for in 2001 (which culminated in the September 2002 order against the broking and sub-broking companies. The order was dismissed by SAT). In that order no action had been taken against the appellant.

SAT observed that its dismissal of that case was technical and that “cannot prevent the Board from proceeding against the appellant for altogether different trades.”

“It is pertinent to mention that these very trades were enquired into by the Board when it proceeded against Bang Equities and found that the trades were manipulative,” said SAT.

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