Sebi Bans 28 Entities for Fraudulent Trade with Fake SMSes

New Delhi, April 30: Markets regulator Sebi has barred 28 entities from the capital markets for sending out unauthenticated SMSes in bulk with misleading 'buy' recommendations to pump up trading volumes in the shares of Kalpa Commercial.

The order comes after Sebi received complaints from intermediaries alleging that some unknown entities are sending guaranteed return SMSes, thereby misguiding the investors with unauthenticated SMSes.

Following this, Sebi conducted a preliminary probe into the share trading of Kalpa Commercial Ltd (KCL) during October 10-18, 2017, specifically in relation to bulk Short Message Services (SMSes) circulated with questionable recommendations with respect to trading in the firm's shares.

The probe found that 28 'connected entities' (group) had employed a scheme for offloading a large number of shares of KCL in a manipulative manner. They participated in the larger scheme of sending misleading ‘buy' recommendations through over 3.42 crore bulk SMSes designed to create investor interest to buy those shares.

Once the investor interest was created, the shares were sold by the participants of the group either directly or through a layer of off-market transfers, Sebi (Securities and Exchange Board of India) noted.

"I prima facie find that by virtue of their dealings in the scrip of KCL, the connected entities along with Abhishek have acted in a fraudulent and deceitful manner wherein they devised a scheme to defraud unsuspecting investors through circulation of SMSes... This attracts prohibitions enshrined in the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulation," Sebi Whole Time Member Madhabi Puri Buch said in an order dated April 27.

Besides, the regulator is of the view that a detailed investigation of the entire scheme employed in this case is necessary to determine the detailed role of named entities and any other entity therein, detailed connection amongst the concerned entities and fund trails, among others.

Accordingly, Sebi has prohibited these 28 entities from the capital markets "till further directions".

Also, the regulator has directed them "to cease and desist from directly or indirectly disseminating messages or news in any form related to the securities market, by any means whatsoever".

These 28 entities included Abhishek Ashok, Tejas Abhirambhai Nathwani, Dhruv Trading Company andTopline Fabrics Pvt Ltd.