Did SEBI Really Bar Two Operators for Cheating Investors?
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Synopsis
In a significant regulatory action, SEBI has barred two operators for three years for allegedly defrauding investors through artificial trading volumes in illiquid stock options. They face a hefty repayment order and penalties, raising serious questions about investor protection in the market.
Key Takeaways
- SEBI's stringent actions are aimed at protecting investors.
- Operators misused trading kits promising guaranteed returns.
- Investors should be cautious with their credentials.
- Artificial volumes can lead to significant market manipulation.
- Regulatory oversight is crucial for market integrity.
New Delhi, June 21 (NationPress) The Securities and Exchange Board of India (SEBI) has imposed a three-year ban on two operators, Shivprasad Pattiya and Alkesh Narware, for allegedly engaging in fraudulent activities that created artificial trading volumes in illiquid stock options, thus cheating investors. They have been ordered to repay Rs 4.83 crore (with an additional 12 percent interest starting February 1, 2022) within a span of 45 days.
The capital markets regulator has also levied a penalty of Rs 25 lakh on each operator under Section 15HA of the SEBI Act, 1992.
The two individuals are prohibited from accessing the securities market and are barred from buying, selling, or engaging in any kind of securities transactions, including mutual fund units, directly or indirectly, for a period of three years from the date of the order, as stated in the SEBI announcement.
Additionally, they are not allowed to sell any of their assets or properties, including mutual funds, shares, and securities held in both dematerialized and physical forms, except for settling the ordered disgorgement.
SEBI's action came after it received alerts regarding 'Out of the Money' (OTM) stock option contracts that exhibited significant price disparities without corresponding movements in the underlying stocks. Investigations suggested that a group of entities, led by Pattiya and Narware, executed trades at non-fair prices while consistently generating positive square-off differences.
Numerous complaints from investors revealed that they had shared their login credentials with members of a WhatsApp group for algorithmic trading, lured by promises of substantial profits. However, these trades led to significant losses, amounting to lakhs.
In response to these alerts and complaints, SEBI launched an inquiry to investigate the actions of the operators, who allegedly misused online trading kits to offer guaranteed returns through algorithmic trading while executing manipulative trades primarily in illiquid OTM stock options, thereby transferring funds from unsuspecting investors to their front entities.
SEBI contends that the operators developed a scheme employing callers to entice investors into the market with guarantees of returns.
Investors received repeated calls and messages from these callers, who promised assured profits through automated trades.
After gaining the investors' trust, the operators obtained their login credentials and placed bets on stock options, ultimately causing the investors to incur losses on their premiums.
Point of View
I emphasize that this incident highlights the need for stringent regulatory oversight in the capital markets. Nations must safeguard their investors from fraudulent practices and ensure that justice is served swiftly to maintain trust in the financial system.
NationPress
21/06/2025
Frequently Asked Questions
What actions did SEBI take against the operators?
SEBI barred Shivprasad Pattiya and Alkesh Narware for three years, imposed penalties, and ordered them to return Rs 4.83 crore with interest.
Why were the operators banned?
They were accused of creating artificial trading volumes in illiquid stock options and cheating investors.
What is the significance of this ruling?
This ruling emphasizes the need for investor protection and regulatory oversight in the financial markets.
How can investors protect themselves from such fraud?
Investors should be cautious when sharing credentials and should thoroughly research before engaging in trades.
What is the penalty imposed on the operators?
A penalty of Rs 25 lakh each was imposed on the operators under Section 15HA of the SEBI Act, 1992.
