Right on the first day of this year, the Securities and Exchange Board of India imposed an individual fine of Rs 15 crore on the Chairman of the Reliance Industries Limited and Rs 25 crore fine on the Reliance Industries Limited after allegations of manipulative trading of the 5 percent stake of RIL in the petroleum refining and sale venture Reliance Petroleum Limited (RPL) in 2007.
SEBI has stated that 12 agents hired by the RIL took short-term positions at the F & O Segment on behalf of the conglomerate while RIL was trading the shares of RPL in cash. The lower settlement prices due to the manipulative practices of a trade by RIL led to a profit increase on the short positions in the F&O Segment that were occupied by prefixed agents of RIL.
The profits made at the positions were transferred by the agents to RIL according to the terms of a prefixed agreement. SEBI further revealed that these manipulative practices by RIL were carried out without the knowledge of the general investors who took part in the share trading. This makes the transaction an instance of fraud. The investors were not aware that the entity behind the F&O segment was RIL. This fraudulent practice of RIL guarded the interests of Reliance Industries but harmed other investors on the market.
Taking these manipulative and harmful trading practices of the conglomerate into account, the SEBI has slapped the fines.
Mukesh Ambani, who is the managing director of RIL, has been adjudged party to these practices and held accountable. This is why the business tycoon has been directed to pay an individual fine of Rs 15 crores.
In 2017, SEBI had ordered RIL to pay up an amount of Rs 447.27 crore with additional interest at the rate of 12% per annum put on the amount from 2007 till the date of payment. RIL was also banned from dealing with equity derivatives in the F&O segment in all manners for the period of a year in effect from the date of issuance of the order in 2017. The new order to levy fines has been issued by SEBI in continuance with the previous orders issued in the case.
The manipulative practices were a link in the chain of operations that were undertaken by RIL in 2007 after the approval of the Board of Directors for the 2007-2008 financial year.
After passing the order levying fines on RIL and its managing director, SEBI has said there is a need to adopt higher ethical values of professionalism, transparency, and good corporate governance by companies so that investors on the market are assured of good trade practices and show an increased level of confidence while dealing with capital markets. SEBI has advocated for stern action against companies that indulge in fraudulent, manipulative practices to guard their self-interests.
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