A third settlement plan was unveiled by capital markets regulator Sebi on Wednesday for companies that participated in reversal trades in the stock options market on the BSE in 2014 and 2015.
What SEBI said?
The Securities and Exchange Board of India (Sebi) said in a statement that the plan will start on March 11 and end on May 10. Following the scheme time, organizations that do not take advantage of this settlement chance will be subject to ongoing legal action under applicable securities laws.
Information dissemination
Additionally, the regulator announced that on March 11, frequently asked questions about the scheme will be accessible on the Sebi and BSE websites.
All entities that executed reversal trades in the stock options between April 1, 2014, and September 30, 2015, and against whom proceedings have been filed and are pending before any authority or forum, would be eligible to settle under the terms of the program. By utilising the program’s benefits, the entities can resolve these legal disputes and prevent additional postponement of the proceedings’ resolution as well as the costly and time-consuming legal processes and other related costs.
Benefited by settlement scheme in March 2023.
The regulator has offered these organisations the opportunity to resolve the dispute before. In 2020, Sebi offered the entities a one-time settlement plan. The program was accessible from August 2022 to January 2023.
Sebi revealed in January 2021 that 1,018 entities—who were purportedly involved in manipulating illiquid stock options—had benefited from its one-time settlement scheme. A total of 10,980 entities benefited from the settlement scheme in March 2023, according to the regulator.After the entities paid settlement fees ranging from Rs 1 lakh to Rs 42 lakh, the lawsuits against them were resolved.During the course of the continuous surveillance, Sebi discovered multiple cases in which a group of organizations was routinely losing money when trading options on specific BSE-listed stocks.
How they caught
Because these businesses were regularly observed to be incurring large losses on their deals, which were reversed with the same counterparties either the same day or the following day, it was noted that their trading appeared strange.As a result, a study was done on the BSE’s stock options division for the months of April 1, 2014, through September 30, 2015.
It was noted that some entities routinely lost a lot of money when they executed reversal trades in stock options on the BSE, while other companies consistently made a lot of money.Approximately 14,000 of the 21,652 entities that made transactions on the BSE stock options section that day were involved in creating artificial volume by making fake or reverse trades.