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Sebi to bring settlement scheme for brokers facing action in illiquid stock option cases


Capital markets regulator Sebi will introduce a settlement scheme for inventory brokers in opposition to whom enforcement proceedings have been initiated and are pending for executing trades in illiquid inventory choices on BSE. The settlement scheme shall start on December 19, 2022, and finish on January 19, 2023, (each days inclusive) or such different date as authorized by the competent authority, in line with a Sebi discover.

“SEBI has determined to introduce a Settlement Scheme for 150 inventory brokers, 2022 (Scheme 2022) for Inventory Brokers in opposition to whom enforcement proceedings have been authorized/initiated and are pending for executing trades in illiquid inventory choices at BSE. Such entities might avail the Scheme 2022 as per its phrases and circumstances,” the market watchdog mentioned in a public discover on Friday.

The current scheme has been made simpler because the entities can apply on-line as a substitute of submission of bodily papers. The scheme was additionally made engaging in order that many entities may avail the identical. Many of the entities can settle their proceedings by paying solely Rs 1 lakh as a settlement quantity.

The scheme offers a possibility for the entities who’ve executed reversal trades within the illiquid inventory choices phase from April 1, 2014, to September 30, 2015, and in opposition to whom enforcement motion initiated by Sebi is pending to settle the case.

This got here after Securities Appellate Tribunal (SAT) handed an order in Could this 12 months on the matter of illiquid inventory choices.

In market parlance, trades by which an individual buys a specific inventory and sells it again to the identical individual are known as reversal trades.

As many as 1,018 entities, allegedly concerned within the manipulation of illiquid inventory choices, had availed the advantage of its one-time settlement scheme. The instances have been settled in opposition to the entities after they paid settlement costs within the vary of Rs 5 lakh to Rs 42 lakh.

As a part of the continuing surveillance, the Securities and Exchange Board of India (Sebi) had come throughout a number of cases whereby a set of entities was constantly making losses by their buying and selling in choices on particular person shares listed on BSE.

It famous that the buying and selling of those entities appeared irregular as a result of they have been constantly seen to be making vital losses by their trades, which have been reversed with the identical counterparties both on the identical day or the following day.

Accordingly, an evaluation of the inventory choices phase of BSE for the interval April 1, 2014, to September 30, 2015, was carried out.

It was noticed that there have been a number of entities that constantly made vital losses, whereas there have been others who constantly made a big revenue by executing reversal trades in inventory choices on BSE.

Out of 21,652 entities that executed trades on the BSE inventory choices phase, a complete of 14,720 have been concerned within the era of synthetic quantity by executing non-genuine or reversal trades on the identical day.

Out of those 14,720 entities, Sebi initiated adjudication proceedings in opposition to 567.

In the meantime, the SAT, via an order in October 2019 within the matter of RS

Ltd, directed Sebi to contemplate holding a Lok Adalat or adopting another different dispute decision course of with regard to the illiquid inventory choices.

Accordingly, Sebi determined to introduce a settlement scheme in illiquid inventory choices instances.



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