SEBI Cracks Down on Stockbroker for Spoofing Scam
SEBI has barred five entities from buying, selling, or dealing in securities until further notice, apart from liquidating existing holdings within three months under strict conditions.
The market regulator, the Securities and Exchange Board of India, has released a temporary order against Patel Wealth Advisors Private Limited (PWAPL) and four of its directors — Denish Maheshbhai Patel, Mitul Umedlal Vora, Kaushal Vasantrai Patel, and Minish Maheshbhai Patel — for indulging in large-scale "spoofing" activities in the stock market.
SEBI has barred all five entities from buying, selling, or dealing in securities until further notice, apart from liquidating existing holdings within three months under strict conditions.
Patel Wealth Advisors placed large buy or sell orders at prices far away from the actual market prices, without the intention of ever executing these orders. These large visible orders created a false impression of market demand or supply, misleading investors.
After creating this false image, the health advisory would then swiftly place smaller genuine orders on the opposite side of the market. This would benefit the entity from the favourable price movements.
Once their trades were executed, the larger misleading orders would be promptly cancelled. SEBI’s examination found that the company continued such practices across 292 contract days involving 173 different scrips.
The SEBI order by the whole-time member Kamlesh Varshney further used elaborate examples of spoofing undertaken by the entities. This included trades in Coffee Day Enterprises Ltd. and Syrma SGS Technology Ltd., where multiple patches of buy-side and sell-side spoofing occurred within a single trading day.
In Coffee Day's case, the Patel Wealth Advisory allegedly earned unlawful profits of around Rs. 9 lakh, while spoofing in Syrma SGS Technology Ltd. yielded profits of around Rs. 4.44 lakh.
The regulator noted that during the examined period, the company made an illicit gain of Rs. 3.22 crore through spoofing practices across both the equity and derivatives segments. The regulator has directed impounding of this amount and has further directed a detailed investigation into the issue.
