SEBI Imposes Rs 5 Lakh Penalty on Ellenbarrie Tea for Manipulative Reversal Trades in BSE Stock Options Market

SEBI Imposes Rs 5 Lakh Penalty on Ellenbarrie Tea for Manipulative Reversal Trades in BSE Stock Options Market​

The Securities and Exchange Board of India (SEBI) has issued a detailed adjudication order imposing a penalty on The Ellenbarrie Tea Company Limited. The fine was levied after the company was found guilty of engaging in non-genuine trades in the illiquid stock options segment of the Bombay Stock Exchange (BSE).

This action highlights SEBI's commitment to maintaining market integrity and preventing deceptive practices among listed entities. The proceedings pertained to trading activities conducted during the period spanning April 1, 2014, to September 30, 2015.

Allegations of Artificial Volume Generation in Stock Options​

SEBI initiated the investigation after observing a large-scale reversal of trades within the stock options segment of BSE. Such patterns were flagged as potentially leading to the creation of artificial volume.

The preliminary investigation revealed that the company was one among several entities involved in executing these alleged non-genuine reversal trades. These actions were deemed manipulative and deceptive, designed to create a false or misleading appearance of trading activity on the exchange.

The charges specifically relate to violations of Regulations 3(a), (b), (c), (d) and Regulation 4(1) & (2)(a) of SEBI's PFUTP Regulations (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market).

Findings on Non-Genuine Trades and Collusion​

The adjudicating officer carefully reviewed the materials and submissions presented by The Ellenbarrie Tea Company Limited. A key finding involved specific trades executed in the contract 'ADPW15APR36.00CE'.

It was established that the company executed two non-genuine reversal trades against a single counterparty, YOCHANA VYAPAAR PRIVATE LIMITED, on the same day. These trades resulted in an artificial volume generation of 96,000 units.

The adjudicator concluded that these transactions were not merely coincidental. The fact that the positions were reversed with the same counterparty and significant price difference indicated a prior meeting of minds. This led to a finding of collusion between the company and its trading partner for predetermined prices.

SEBI Mandates Fine Following Violation of PFUTP Regulations​

Based on these findings, the adjudicating officer determined that the trades executed by the Noticee were not genuine. The actions created an artificial appearance of volume in the contract's stock options segment.

The company was officially found in violation of multiple provisions of the PFUTP Regulations for indulging in fraudulent and unfair trade practices. Consequently, a monetary penalty under Section 15HA of the SEBI Act, 1992, was imposed.

The Ellenbarrie Tea Company Limited has been fined Rs 5,00,000/- (Rupees Five Lakhs only). This penalty is deemed commensurate with the oversight in executing genuine market trades on the exchange platform.

Compliance and Enforcement Directives​

The company is required to remit or pay the specified penalty amount within 45 days of receiving this order. Payment must be made through SEBI's designated online payment facility.

SEBI cautioned that failure to comply with the payment deadline may trigger consequential recovery proceedings under Section 28A of the SEBI Act, 1992. These actions include the attachment and sale of properties to realize the outstanding penalty amount along with interest.