January 19, 1996
The Presidents/ Executive Directors/
Managing Directors of all the stock Exchanges.
Please refer to the minutes of the meeting of Executive Directors/ Presidents/Managing Directors of all the stock exchanges convened by SEBI on December 20-21, 1995. In order to curb market manipulation and rigging of prices the following surveillance related decisions were taken :
i. Regular surveillance related reports are required be submitted, as prescribed by SEBI vide its letter dated October 27, 1995. The exchanges should ensure that these reports are regularly sent to SEBI with complete data as required in the prescribed format.
ii. In the case of newly listed scrips, four trading days are given for price formation and price stabilisation. During this period, circuit breaker is not applied and monitoring is not done by the exchanges. It was decided that monitoring of the newly listed scrips will be done by the exchanges from the first day of trading itself. Circuit breakers and other monitoring mechanisms will also apply form the second day of trading as against the present system of applying the same after the fourth day.
iii. In case of newly listed/permitted scrips, where there is abnormal price variation, the exchanges will impose a special margin of 25% or more on purchases in addition to the regular margin. Further, the seller will also be required to pay a penal margin equivalent to the special margin (applicable to buyers) on the undelivered quantity. Such penal margin will be retained by the exchanges for a period of three months or one month after the delivery, whichever is earlier. In case of non-delivery, the usual auction procedure will also be applicable. The special/penal margin will apply not only to newly listed or permitted securities but also to other traded scrips where price manipulation is being noticed by the stock exchanges.
iv The suspension of trading on account of market manipulation or price rigging will be immediately informed by the concerned stock exchange to other stock exchanges. The other exchanges will also suspend the trading in that scrip where the said suspension is for more than a day. While intimating these, the stock exchange will also mention the brief reasons.
v Further, SEBI’s approval will be sought by the stock exchanges whenever a scrip is suspended for more than 3 days. The cases of suspension of more than three days must be followed by an investigation, which will be completed in a time bound manner. If more than one Stock Exchange is involved in such an investigation, it will be done in coordination with other exchanges. If necessary, SEBI will take up such investigation.
The decisions above are to be implemented immediately. The status of implementation should be reported in the monthly D.O. letters and also through separate letters to the Division Chief, Market Intelligence Division of SEBI.
L K SINGHVI
MANAGING DIRECTORS OF ALL STOCK EXCHANGES
Please refer to our Circular dated October 30, 1995, wherein SEBI had advised all the Stock Exchanges that no trading in the shares of M/s. Rupangi Impex Ltd. would be permitted on the Stock Exchanges from November 1, 1995 till further orders.
Since the investigation has been completed, the necessary action is being initiated against the persons involved in price manipulation under Sections 11(B) and 24 of the SEBI Act for violations of provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 1995. It is therefore decided that, in the interest of the investors and the Securities Markets, trading in the shares of Rupangi Impex Ltd. may be allowed from Monday, January 29, 1996.
It is further decided that the monies collected in adherence to our aforesaid circular dated October 30, 1995, may be transferred to the “Investor Protection Fund” of the concerned Stock Exchanges.
M. D. PATEL
January 25, 1996