Sebi bars Mehul Choksi from securities market for ten years

The market regulator also imposed a fine of Rs 5 core on Choksi, which has to be paid within 45 days, the order stated.

In January this year, the market regulator had restrained Choksi from accessing the securities market for one year.

“The Noticee (Mehul C Choksi) is hereby restrained from buying, selling or otherwise dealing in securities, directly or indirectly, in any manner whatsoever and is further prohibited from accessing the securities market, for a period of ten years from the date of this order,” Ashwani Bhatia, whole time member, Sebi wrote in the order on Monday.

On March 10, 2017, the market regulator directed investigation in the matter of alleged manipulative trading in the scrip of GGL to ascertain whether there was any violation of the provisions of the Sebi Act.

Accordingly, Sebi conducted an investigation into trading activities of certain entities in the scrip of GGL for the period July 18, 2011 to January 25, 2012. Choksi was the chairman and managing director of GGL during the investigation period.

The order said Choksi had funded a set of 15 entities, known as ‘front entities’, who were directly or indirectly connected with him and with each other and who had taken position in the scrip of GGL both in the cash and derivative segments during the Investigation Period, and had used them as front entities for manipulation in the scrip of GGL.

On the basis of bank statements available with Sebi, it was found that the fund transfers by GGL to front entities were to the extent of Rs 77.44 crore, out of which funds of Rs 13.33 crore were used by front entities to trade in the scrip of GGL.

Front entities had taken a long position, both in the cash segment and the derivatives segment, wherein they had incurred significant losses while trading as such in the derivatives segment, it said.

“It was apparent that the trades of the front entities in the derivatives segment were not for hedging purposes and were not executed in the normal course of dealing in securities, but for maintaining the price and volume of the scrip of GGL so as to benefit the Noticee (Choksi),” the order stated.

Choksi, through front entities, tried to capture or corner the shares available in the market during the investigation period to reduce the shares available for general investors which subsequently increased after the front entities sold the shares in the market, it said.

The front entities cornered the position limits in the scrip of GGL by building up substantially large positions in the derivatives segment ranging from 15.7 per cent to 56.65 per cent of the market wide position limit, it said.

As per publicly available information Choksi has fled the country on January 4, 2018 and is stated to be residing in Antigua and Barbuda, the order said. Cases were filed against him in India in the wake of the Punjab National Bank scam.