The Indian Stock Exchange Board on Friday imposed a fine of 25 million rupees on Reliance Industries and 15 million rupees on its chairman, Mukesh Ambani, for manipulating shares of Reliance Petroleum Ltd (RPL) in November 2007.
The issue relates to the manipulation during the sale and purchase of Reliance Petroluem Limited shares in the cash and futures segments in November 2007. This followed RIL’s decision in March 2007 to sell 4.1% of the stake. participation in RPL, a publicly traded subsidiary that later merged with RIL in 2009.
The market regulator found that Mukesh Ambani, as RIL’s CEO, was responsible for RIL’s handling activities.
“I am of the opinion that Noticee-2 (Ambani), being the Managing Director of RIL, cannot absolve himself and plead ignorance about the entire scheme of manipulative transactions carried out for the benefit of RIL in the actions of RPL in the Cash and F&O Segment. Therefore, I find that Noticee-2 (Ambani) was responsible for the actions of RIL that resulted in violations of the PFUTP Regulations, 2003 and the SEBI Circular. Therefore, I consider that Noticee-2 has violated the provisions of Regulations 3 (), (b), (c), (d) and Regulations 4 (1), 4 (2) (d), (e) of the PFUTP Regulations, 2003 and Circular SEBI no. SMDRP / DC / CIR-10/01 dated November 2, 2001 “, Observed Adjudicating Officer BJ Dilip on a 95-page request.
“I note that a managing director is responsible for managing the day-to-day affairs and business of the company and has been granted such power under the Companies Act of 1956. This implies a high level of responsibility and knowledge of the overall operation of the company. company “, said the order.
SEBI said that any manipulation in the volume or price of securities always erodes investors’ confidence in the market when investors are on the receiving end of market manipulators.
It was found that 12 RIL appointed agents took short positions in the F&O segment on behalf of RIL, while RIL traded in RPL shares in the cash segment. During the period from November 1, 2007 to November 29, 2007, RIL carried out various transactions in the Cash Segment and RIL through the Agents of the F&O Segment. From November 15, 2007 onwards, RIL’s short position in the F&O Segment consistently exceeded the proposed sale of shares in the Cash Segment. On November 29, 2007, RIL sold a total of 2.25 million shares in the cash segment during the last 10 minutes of trading, causing RPL’s share prices to fall, which also reduced the RPL November futures settlement price in the F&O segment. RIL’s total outstanding position of Rs 7.97 crore in the F&O segment was settled in cash at this depressed settlement price, generating profits on those short positions. Said benefits were transferred by the agents to RIL according to prior agreement.
The modus operandi of the manipulation was explained as follows:
“RIL has entered into a manipulative trading scheme regarding the sale of RIL’s 5% stake in RPL. However, prior to undertaking sale transactions in the cash segment, RIL fraudulently booked large short positions in RPL’s November futures through 12 agents with whom it had entered into an agreement to circumvent position limits for commission payment.As a result, RIL fraudulently cornered nearly 93% of the open stake in RPL November Futures, when said 12 agents took short positions in the F&O segment on their behalf. Margin payments for said Agents was provided by Noticee-3 and Noticee-4. An ordinary person related to RIL had placed orders in the Cash Segment on behalf of RIL and in the F&O segment on behalf of the Agents “
While noting that the execution of manipulative operations affects the price discovery system itself, the adjudicating official said: “I am of the opinion that such manipulative acts should be dealt with severely to deter manipulative activities in the capital markets.” .
“In the present case, general investors were not aware that the entity behind the aforementioned F&O segment transactions was RIL. The execution of the … fraudulent transactions affected the price of the RPL securities both in cash and in the F&O segments. and it hurt the interests of other investors, “SEBI said.
“I am of the opinion that any manipulation in the volume or price of securities always erodes investors’ confidence in the market when investors are on the receiving end of market manipulators. In the present case, investors in They generally did not know that the entity behind The execution of the aforementioned fraudulent operations affected the price of RPL securities both in cash and in the F&O segments and harmed the interests of other investors. The execution of manipulative operations affects the price discovery system in itself. Adverse impact on the equity, integrity and transparency of the securities market. I believe that such acts of manipulation should be treated severely to deter manipulative activities in the capital markets. “
Furthermore, Navi Mumbai SEZ Pvt Ltd and Mumbai SEZ Ltd, who aided and incited RIL by providing funds to one of RIL’s appointed agents, have been asked to pay a fine of Rs 20 crore and Rs 10 crore respectively.
The amount of the penalty must be paid within 45 days of the order.
Click here to read / download the order
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