SEBI bars 59 entities from trading for manipulating markets and evading taxes

August 21, 2015

The Securities and Exchange Board of India (SEBI) has barred 59 entities from trading in Bombay Stock Exchange due to alleged manipulation of the stock exchange route for evading taxes.
As per the order of SEBI these 59 entities will not conduct any activity of trading, buying, selling or dealing in the securities markets, either directly or indirectly.
The regulator took this strict action in wake of market manipulator’s action of evading taxes or converting black money into ‘white’ through the route of stock exchange.
SEBI has also referred to income tax department, enforcement directorate and financial intelligence unit for investigating a probable money laundering scheme.
The regulator’s surveillance system detected huge trade in low-value illiquid stocks, the stocks which cannot be sold quickly due to a shortage of interested buyers or a lack of an established trading market. Examples of illiquid stocks are penny stocks, microcap stocks and nanocap stocks.
Why illiquid stocks Matters?
Illiquid assets are considered more risky than liquid assets as during periods of market volatility there are very fewer buyers than sellers and thus the illiquid assets become even more difficult to sell. To sell these illiquid assets holders discounts to the asking price to attract potential buyers which results into zero value of that stock at certain points in time.
How Black to White?
The companies with poor financial fundamental raises huge capita by allotting preferential shares to various entities. This results into sharp rise of their shares price, these artificially inflated stocks are offloaded through companies funded by those seeking to convert unaccounted money into ‘white’ money.
Note: So far SEBI has issued around 10 orders and has suspended trading licence of 36 companies involved in allegedly irregular trades and has barred over 900 entities from trading.