Market regulator Securities and Exchange Board of India (Sebi) has imposed Rs. 30 lakh penalty on Ford Brothers Capital Services for fraudulent dealings in the shares of Nandan Exim and failing to comply with the summons.
Sebi has found that Ford Brothers had executed manipulative trades in shares of Nandan Exim on behalf of one of its clients, thereby violating norms related to fraudulent trade practices.
Besides, it noted that Ford Brothers "failed to exercise due care and diligence while discharging its duty as a prudent broker".
In the order dated May 14, Sebi has slapped a fine of Rs. 15 lakh on Ford Brothers for indulging in fraudulent trade practices and violating stock broker norms.
Further, it imposed a penalty of Rs. 15 lakh on the broker for not providing the information sought by the regulator's Investigation Authority (IA) in various summons.
"...the information sought by the IA was crucial and central to the investigation and failure on the part of the noticee to comply with the summonses had indeed hampered the investigation," the regulator noted.
Sebi had conducted an investigation into the trading in Nandan Exim scrip for the periods June 13, 2005 to September 30, 2005 and September 20, 2006 to November 23, 2006, as there was sharp rise and fall in the price of the scrip and heavy volumes were traded in the scrip during this period.
The probe revealed that Ford Brothers on behalf of its client, Shailesh M Ved, executed trades at a price higher than the last traded price, placed big buy orders at a lesser price to the last traded price and thus created artificial buying pressure in scrip of the Nandan Exim, among other things.
The regulator also noted that "gains per se were made by the noticee in that they traded in the scrip of Nandan Exim in a manner meant to create artificial volumes and liquidity which is an important criterion, apart from price, capable of misleading the investors while making an investment decision".