Dated: 12th September 2005
Members are aware that recently the market has been witnessing
increased activity in terms of volumes and various indices have been recording
all time highs, which may be due to various underlying factors. There is a
concern that the bullish sentiments in the markets could be/are being utilized
by manipulators to rig up the price of undeserving scrips. The actions of such
manipulators result in price rise in shares of those companies which have weak
fundamentals, which are defunct or loss making, which have defaulted to their
lenders etc.,
There is also a concern that some of the transactions in the stock
exchange are being executed with the sole intent of availing income-tax
benefits. With the introduction of favourable
income tax treatment for profit/loss arising from securities transactions done
on stock exchanges the manipulators may utilize the smaller/regional stock
exchanges that have lesser turnover and lower liquidity as compared to major
stock exchange to execute trades in scrips at prices which are different from
that prevailing in the major stock exchanges and thereby create arbitrage
opportunities.
Members are advised not to trade in scrips away from the prevailing
market prices and exercise caution in executing orders on their own behalf
and/or on behalf of their clients.
Members are further advised to be more vigilant about the activities of
their sub-brokers and clients. Members are also advised to exercise caution
while dealing in illiquid, low priced/penny stocks. Further dealings of sub-brokers/clients should be monitored
closely including correlation of clients’ trading activity with the information
provided by the clients at the time of registration including financial
information or in view of their past trading record, including large
concentration in one or few securities, etc. Besides the above, members are
advised to put in place appropriate systems and procedures for the above
purpose and alert the Exchange in case any unusual activity comes to their
notice.
Members are also advised to ensure that they do not deal on behalf of
any of the entities that have been restrained by SEBI from dealing in
securities. Information of such entities is available on the websites of SEBI (www.sebi.gov.in).
Members may please note that non-compliance of the above requirement
and / or any deviation there from would attract stringent penal/disciplinary
action by the Exchange.
Members may also advise their sub-brokers and clients to exercise
necessary caution in their dealings and not to get carried away by
unsubstantiated news, rumours, tips etc.
Secretary