Capital markets regulator Sebi on Friday imposed fines totalling Rs 1.55 crore on 23 entities for violating regulatory norms in the matter of trading by certain entities in mentha oil futures contracts at Multi Commodity Exchange (MCX).
The regulator slapped a fine in the range of Rs 1 lakh to Rs 10 lakh on 23 entities.
The order came after MCX had observed that certain entities are connected with North End Foods Marketing (NEFM) and on the basis of funding from NEFM they were holding more than 75 per cent of the total exchange deliverable stock of mentha oil held in the exchange.
Further, MCX submitted its observations to Sebi in June 2018 and conducted a detailed examination to find out whether certain connected entities intended to corner the market on long side in mentha oil contracts thereby violating the position limits as prescribed by the regulator.
In its order, Sebi's Adjudicating Officer Vijayant Kumar Verma said, "I find that Noticee 3 to Noticee 21, through a premeditated arrangement and artifice for active concealment of actual beneficiary positions and in violation of position limits as prescribed by the regulator, has deliberately accumulated/ cornered stock of mentha oil through connected noticees." Noticees played a role of conduit and assisted the NEFM to take an influential beneficiary position in mentha oil contracts through unfair means and misuse of the exchange mechanism, Verma said.
"I find that by actively concealing ultimate beneficial ownership of mentha oil stock so acquired, noticees has created false and misleading appearance of trades wherein trades were done/funded by noticees without disclosing their connection, he added.
Therefore, the noticees have violated the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms.
Sebi also noted that R K Commodities Services (RCS) being a trading member has played an active role by executing the trades of noticees and by channeling funds through its connected entities i.e Rapid Credit & Holdings (Rapid) and Invictus Stock Research (Invictus).
Thus, by not following the adequate due diligence with respect to the reporting to the exchanges RCS had played its part in the whole scheme in cornering the mentha oil future contract, thereby violating stock brokers regulations.
Rajendra Kumar Gupta, Navdeep Varshneya and Sundeep Chadha being directors of RCS, Rapid and Invictus are directly involved in the whole scheme and are complicit in the entire scheme.
Through such acts RCS, Rapid, Invictus and its directors -- Gupta, Varshneya and Chadha -- flouted the norms.
In a separate order, the regulator slapped a fine of Rs 40 lakh on 12 entities for violating market norms in the matter of Transwind Infrastructure Ltd (TIL).
The fine has to be paid by the entities jointly and severally and within 45 days of the order, Sebi said.
Sebi investigated in the matter of TIL, wherein certain unsolicited SMSs were floated in Capital One channel in messaging app Telegram giving buy recommendation for the scrip Transwind.
Post circulation of messages, a substantial volume spurt was observed in the scrip.
Thereafter, a detailed investigation was initiated in the shares of TIL for the period from May-July 2020 to ascertain any violation of stock broker regulations and PFUTP rules.