SEBI Fines Gujarat CM Rupani’s HUF For Unfair Trading Practices

HUF allegedly indulged in ‘manipulative trading’, violating SEBI’s clauses related to the securities market.

Gujarat Chief Minister Vijay Rupani with BJP President Amit Shah at a rally in Gujarat.

(Photo: PTI)

The Securities and Exchange Board of India (SEBI) has penalised Gujarat Chief Minister Vijay Rupani’s Hindu Undivided Family (HUF) for “manipulative trades” in a company called Sarang Chemicals, Business Standard reported on Thursday, 9 November.

The company’s 22 entities have come under the capital market regulator’s scanner, including Rupani’s HUF, for manipulative transactions between January and June 2011. While a penalty of Rs 15 lakh has been imposed on Rupani’s HUF, three other individuals out of the 22 entities have been asked to pay Rs 70 lakh or more. A total of Rs 6.9 crore worth of penalties have been imposed by SEBI.

Rupani defended himself by saying that the SEBI order had been overruled by the appellate tribunal and that there were no financial irregularities carried out by him in any manner.

I have not received any SEBI notice. The said SEBI order was one-sided and incorrect. One of the persons named in the list had approached the Securities Appellate Tribunal (SAT), which is a body above SEBI. The SAT has ruled that the SEBI ruling was incorrect... There is not an illegality equivalent to even the tip of a safety pin in these transactions.

Vijay Rupani

SEBI had issued a common show notice to all the 22 entities for alleged violations under the SEBI prohibition of Fraudulent and Unfair Trade Practices (PFUTP) in connection with the securities market in May 2016, the report added.

However, SEBI did not receive any replies from Rupani’s HUF, Business Standard reported. “The noticee (Rupani HUF) contended that the CD (compact disk) attached to SCN is damaged and it is unable to open the same. Considering the request of the noticee, another CD was sent to him vide communique, dated 25 May 2016, and informed the noticee number 18 that in case it is still unable to open the CD then, its duly authorised person may collect the same from office of undersigned with prior intimation,” the report quoted SEBI’s order as saying, adding that they haven’t received a response till date.

The market regulator had divided the noticees (the 22 entities) into two: one responsible for “price manipulation” and the other for “creating misleading appearance in the securities market and creating artificial volume in the shares of Sarang Chemicals by trading among themselves,” the Business Standard report explains. Rupani’s HUF has found itself mentioned for the latter.

According to SEBI’s investigation, 20 of the 22 entities bought shares worth 33 percent of the market volume and later sold these shares valued at 86 percent of the market volume.

“It is observed that noticee numbers 1-9, 18 & 20 by trading voluminously amongst themselves had first generated interest among the other investors to trade in the scrip and when the other investors started trading in the scrip due to such false impression of market, some of the group entities (noticee numbers 1-5 and 10-17) had offloaded shares in the market at an increased price... Such pattern of trading clearly reveals the ulterior/malafide intent and certainly such activities of noticee numbers 1-18 & 20 is in violation of regulation 3 (a) to (d), 4 (1) & 4 (2) (a), (b) & (e) of the PFUTP Regulations,” the SEBI order said.

(With inputs from IANS)

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