The Hindu Business Line : BILT case: 2 brokers restrained from market

SEBI has directed a dealer for UTI Securities and a sub-broker with Emkay Shares and Stock Brokers not to buy, sell or deal in securities. They were found guilty of manipulation in a case relating to shares of Ballarpur Industries Ltd (BILT).

Also, 34 clients registered with Emkay Shares have been asked to deposit Rs 65.95 lakh (which SEBI reckons is the profit made by them from such trading) in the custody of NSE within 15 days of the SEBI order.

The SEBI order described the case as one of “customised front running’ – an activity in which “a trader takes a position of unfair advantage in advance of a large buy or sell order that the trader knows will move the price of that equity in a predictable fashion.”

‘Abnormal trading’

An analysis of the “abnormal” trading pattern in the shares of BILT between November 1, 2006, and June 13, 2007, showed that a set of clients registered with Emkay and a director of broking firm Prayas Securities were dealing in shares of BILT around the time of large sell orders by an FII, Netherlands FMO NV.

On each of the dates that Netherlands FMO sold (through UTI Securities), a few among the “clients” of Emkay Shares sold BILT shares prior to the FII sale and also bought an identical quantity after the sell order was placed on behalf of the FII at a reduced price.

SEBI contends that the dealer (Mr Raajeev Kasat) was the point of contact between the trading member (UTI Securities) and Netherlands FMO, which used to convey its orders by e-mails that specified a limit price and quantity for the sales to be carried out, said the SEBI order.

SEBI observed a substantial time gap between some of the orders placed and their execution by UTI Securities. “It prima facie appears that Mr Kasat has used his discretion in respect of the timing of the sell orders on behalf of FMO.”

SEBI also ordered UTI Securities and Emkay to conduct an internal enquiry into the matter and take appropriate actions against their employees or agents named in the order and submit an Action Taken Report to SEBI within 30 days.

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