Few instances of self-trades would not, ipso facto, make it objectionable: SEBI

Read order: Adjudication Order No. ORDER/SM/DD/12306/2021-22 in respect of MBL & Company Ltd

Pankaj Bajpai

New Delhi, August 20, 2021: While disposing of adjudication proceedings against Noticee (MBL) without imposition of any penalty, the Securities & Exchange Board of India (SEBI) opined that a few instances of self-trades in themselves would not, ipso facto, amount to objectionable trades. 

Soma Majmuder (Adjudicating officer) found it difficult to conclude that self-trades by Noticee in scrip of Halonix were in violation of provisions of Sections 12A(a), (b) and (c) of the SEBI Act r/w PFUTP Regulations 3(a), (b), (c), (d), 4(1), 4(2)(a) and (g). 

The observation came pursuant to allegations against Noticee for trading in scrip of Halonix in fraudulent manner without intention to transfer beneficial ownership of shares, thereby, violating provisions of the Act r/w PFUTP Regulations. 

Going by the background of the case, the SEBI conducted an investigation in the matter of Halonix Ltd. for investigation period and observed that average traded volume in scrip was comparatively high during the period. Besides, entities including Noticee MBL & Company Ltd. had entered into self-trades on multiple days during the period. 

The SEBI stated that total volume of self-trades executed by Noticee was only 0.004529% of total market volume on both BSE and NSE during investigation period and that Noticee had executed self-trades on only 3 trading days during the period on BSE. 

On all trading days when Noticee had executed self-trades, percentage of volume of self-trades to total market volume traded on NSE and BSE was miniscule, as it was less than 0.1% of total market volume on the 3 days. Hence, percentage contribution in volume did not suggest possibility of any manipulative intent on Noticee’s part to extent of contributing to market volume through artificial volume creation in scrip of Halonix during investigation period, added the Board. 

The Board reiterated that a few instances of self-trades in themselves would not, ipso facto, amount to objectionable trades. Other factors relating to manipulative intent, namely, frequency, timing, number of self-trades had not been alleged against Noticee in Investigation Report. 

Only few instances of self-trades could not be considered to be fraudulent in nature, unless supporting facts and circumstances leading to manipulative intent behind these trades were also presented, noted the Board. 

Therefore, SEBI refrained from levying penalty, observing that the investigation report was silent on the aspect as to whether self-trades executed by Noticee were manipulative trades intended to defraud the market.