Sebi slaps Rs 15 lakh penalty on individual for fraudulent trading

Regulator Sebi today slapped a total penalty of Rs 15 lakh on an individual for indulging in synchronised trading and acting as a portfolio manager without registration.

The matter is related to trading in the scrips of RM Mohite Textiles and Atlas Cycles (Haryana).

While the regulator imposed a fine of Rs 10 lakh on one Amit Joshi for violating PFUTP (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, a penalty of Rs 5 lakh was levied on him for not complying with Sebi Act and Portfolio Managers Regulations, according to an order.

The Securities and Exchange Board of India (Sebi) had conducted an investigation in the shares of RM Mohite Textiles Ltd (RMTL) and Atlas Cycles (Haryana) Ltd (ACL) for the period from November to December 2007.

Following the investigation, it was alleged that Amit Joshi, the acting portfolio manager, had violated various norms while trading in the scrips of RMTL and ACL on behalf of one Pegasus Stocks and Shares Pvt Ltd.

In the order, the regulator noted it is clear that Joshi agreed with Pegasus for managing its portfolio with a mutual understanding as to sharing the profits.

"Amit (Joshi) was acting as a portfolio manager on behalf of Pegasus without holding a valid certificate of registrations from Sebi as such," the regulator said.

Sebi also noted how all the trades on behalf of Pegasus in the scrips of ACL and RMTL were executed by Amit in synchronisation with related entities.

"The modus operandi used by Amit (Joshi) is to buy the stock (RMTL and ACL) at a higher price and sell the same at a lower price to Nitin Gordia and Rita to enable them to receive the benefit of price difference through synchronised and reversal trades and loss to Pegasus," Sebi said.

Synchronised trading refers to a practice where the seller and buyer may have an understanding between them on trading of specific shares.

According to Sebi, Gordia and Rita are husband and wife and are known to Amit Joshi.

The regulator said by creating artificial volume, Joshi through his connected persons has defrauded other investors and misused the stock exchange mechanism.

In a separate order, Sebi imposed a penalty of Rs 8 lakh on Covidh Technologies Ltd for the firm's failure to make timely disclosures as required under PIT (Prohibition of Insider Trading).