2017 (9) TMI 2010 - Board - SEBI

Violation of provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) - HELD THAT - As pursuant to the interim orders, SEBI conducted a detailed investigation of the entire scheme employed in the instant matter, role and connection amongst the concerned entities, funds used for the price manipulation of the scrip of Radford, etc., so as to ascertain the violation of securities laws. Upon completion of investigation by SEBI, investigation did not find any adverse evidence/adverse findings in respect of violation of provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations) in respect of following 82 entities (against whom directions were issued vide the interim orders as confirmed vide the above said confirmatory orders) warranting continuation of action under Section 11B r/w 11(4) of SEBI Act. Considering the fact that there are no adverse findings against the aforementioned 82 entities with respect to their role in the manipulation of the scrip of Radford, directions issued against them vide interim orders dated December 19, 2014 and November 9, 2015 which were confirmed vide Orders dated October 12, 2015, March 18, 2016 and August 26, 2016 are liable to be revoked. As in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11, 11(4) and 11B of the SEBI Act, hereby revoke the Confirmatory Orders dated October 12, 2015, March 18, 2016 and August 26, 2016 qua aforesaid 82 entities (paragraph 9 above) with immediate effect. The revocation of the directions issued vide the abovementioned orders (at paragraph 11) is only in respect of the entities mentioned at paragraph 9 of this order in the matter of Radford Global Limited. As regards remaining entities in the scrip of Radford, violations under SEBI Act, SCRA, PFUTP Regulations, etc., were observed and SEBI shall continue its proceedings against them. Hence, the directions issued vide Orders against the remaining 24 entities shall continue. This revocation order is without prejudice to any other action SEBI may initiate as per law

Issues Involved:
1. Preferential Allotment and Stock Split.
2. Artificial Price and Volume Manipulation.
3. Interim Orders and Restraints.
4. Detailed Investigation and Adverse Findings.
5. Revocation of Directions Against Certain Entities.
6. Continuation of Proceedings Against Remaining Entities.

Issue-wise Detailed Analysis:

1. Preferential Allotment and Stock Split:
SEBI conducted a preliminary examination into the dealings in the scrip of Radford Global Limited from January 28, 2013, to March 24, 2014. It was observed that shares were allotted on a preferential basis to entities connected or related to Radford. Just before the expiry of the lock-in period of these shares, Radford announced a stock split, which reduced the per-share price and increased liquidity, facilitating the preferential allottees to exit upon the expiry of the lock-in period.

2. Artificial Price and Volume Manipulation:
Post the lock-in period, it was noted that the preferential allottees sold the shares to entities connected or related to Radford Group/Suspected Entities, thereby making huge profits. The price movement of the scrip was not backed by the company's fundamentals and financials. It was prima facie found that the Radford Group & Suspected Entities and allottees used the securities market system to artificially increase the volume and price of the scrip for making illegal gains and converting ill-gotten gains into genuine ones, violating the SEBI Act, 1992, and SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations).

3. Interim Orders and Restraints:
SEBI passed ad interim ex-parte orders on December 19, 2014, and November 9, 2015, restraining 108 and 15 entities respectively from accessing the securities market and dealing in securities, either directly or indirectly, until further directions. The names of these entities were listed in the judgment.

4. Detailed Investigation and Adverse Findings:
Following the interim orders, SEBI conducted a detailed investigation into the entire scheme, the role and connection among the concerned entities, and the funds used for the price manipulation of Radford's scrip. The investigation did not find adverse evidence or findings against 82 entities with respect to the violation of PFUTP Regulations, warranting the continuation of action under Section 11B read with 11(4) of the SEBI Act. However, adverse findings were found against Radford, warranting adjudication proceedings.

5. Revocation of Directions Against Certain Entities:
Considering no adverse findings against the 82 entities, SEBI decided to revoke the directions issued against them via interim orders dated December 19, 2014, and November 9, 2015, which were confirmed by orders dated October 12, 2015, March 18, 2016, and August 26, 2016. The revocation was immediate and only applied to the mentioned 82 entities.

6. Continuation of Proceedings Against Remaining Entities:
For the remaining 24 entities, SEBI observed violations under the SEBI Act, SCRA, PFUTP Regulations, etc., and decided to continue its proceedings against them. The directions issued via orders dated October 12, 2015, March 18, 2016, and August 26, 2016, against these entities shall continue. This revocation order is without prejudice to any other action SEBI may initiate as per law.

Conclusion:
A copy of this order was to be served on the Stock Exchanges and Depositories for necessary action.

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