Market regulator Sebi on Monday prohibited stock broker Patel Wealth Advisors from trading in securities using its proprietary account for allegedly involving in ‘spoofing’ activity. Additionally, the regulator has restrained four directors (present and former) of the broker from buying, selling, or dealing in any securities, directly or indirectly, according to an interim order.
Also, Sebi has directed the impounding of Rs 3.22 crore in unlawful gains earned from them. Sebi will be undertaking a detailed investigation into the matter.In its interim order, Sebi noted that PWAPL, a registered stock broker, undertook spoofing activity multiple times on several days resulting in 621 unique spoofing instances.
The present matter involves 173 scrips across 292 scrip-days and resulted in unlawful gains of around Rs 3.22 crore.Order spoofing refers to a type of manipulative trading activity which involves placing bid or ask orders, with the intent of cancelling the said orders before execution while simultaneously executing trades on the opposite side of the book.
Going by the order, PWAPL allegedly placed multiple fully disclosed buy/ sell orders in various scrips with large quantities at prices significantly below/ above the prevailing market price, without intention of execution.
These substantial pending orders allegedly created a false impression of increased demand/ supply in the scrips, thereby misleading the investors at large and affecting the price in the scrip.
Further, while its large orders were pending in the order books of various scrips, PWAPL, allegedly within a short timeframe, transacted on the opposite side in the market and earned wrongful gains.
Once PWAPL allegedly executed its order on the opposite side of the book, a substantial part of the orders placed on the spoofing side were cancelled.”The order spoofing is a manipulative, fraudulent and unfair trade practice employed by PWAPL to deceive other market participants and profit from price fluctuation they induced unwary investors in the market. This practise distorted market prices and undermined market efficiency,” Sebi said in its order.
Accordingly, the regulator has prohibited Patel Wealth Advisors “from buying, selling or otherwise dealing in securities, directly or indirectly, in its proprietary account”.The order came after the Securities and Exchange Board of India (Sebi) had conducted an examination into the trading activities of Patel Wealth Advisors Private Limited (PWAPL) for the period of January 1, 2022 to January 31, 2025.