The market regulator on Tuesday barred the administrator of ‘Safebulls’, a Telegram channel that provided stock recommendations, from accessing the stock market for one year on charges of manipulative trading.
The Securities and Exchange Board of India has barred Hanif Kasambhai Shekh and Robert Resources Ltd., a commodity trading firm in which he's the managing director.
Safebulls has over 60,000 subscribers on Telegram. The channel provided stock recommendations in both cash and derivative segments to its subscribers.
RRL, according to the regulator, took positions in the stocks recommended on the Safebulls channel before they were recommended on it. Subsequently, these positions were squared off.
Since these recommendations influenced the decisions of investors dealing in such securities, it interfered with the free and fair operation of the markets, the regulator said. Such recommendations induced investors to trade in those scrips, it said.
According to SEBI, they started off by purchasing shares of specific stocks in the RRL trading account. To lure and persuade investors to purchase those stocks, they would offer 'Buy' recommendations for these stocks on the channel. Finally, they would take advantage of the rising price after the recommendation and sell their shares at a profit.
The fact that sell trades were executed after the buy recommendation was made on the channel indicates that there was a manipulative intent in making the said recommendations to take advantage of the price movement in the scrip.SEBI's Order
The recommendations on the channel induced a large number of investors to deal in such stocks, causing fluctuations in the price and volume of the recommended stock, the regulator noted.
As a result, the market regulator has directed both Shekh and RRL to jointly disgorge the profit they made out of this entire manipulative trading fiasco.
The wrongful gains made by them were to the tune of about Rs 29 lakh. According to the order, the same must be disgorged within 45 days at an interest rate of 12% per annum from Feb. 18, 2022—the date on which the last fraudulent trade was recorded.
SEBI has also imposed an additional joint penalty of Rs 5 lakh on RRL and Shekh.
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