SEBI Holds Unison Metals Shares Were Manipulated Via Telegram Tips, Bars 15 Entities From Market

The Securities and Exchange Board of India (SEBI) has recently passed a final order holding that the shares of Unison Metals Limited were manipulated through stock recommendation tips circulated on Telegram channels.

The regulator barred 15 noticees from accessing the securities market for periods ranging from one to three years, ordered disgorgement of unlawful gains and imposed monetary penalties, while dropping proceedings against two noticees.

Whole Time Member Amarjeet Singh held that the scheme resulted in public investors purchasing the scrip at inflated prices. He said the conduct caused significant harm to unsuspecting investors and undermined confidence in the fairness of the securities market.

“The above scheme effectively resulted in public shareholders purchasing the scrip at an inflated price, with a marked increase in the number of public shareholders. While it may not be possible to attribute the exact loss suffered by investors, such fraudulent activity inflicts substantial harm on unsuspecting investors and dents investor confidence in the fairness of the markets,” the order said.

It added that such fraudulent activity dents investor confidence, even if the exact loss suffered by investors cannot be quantified.

The proceedings arose from an interim ex parte order-cum-show cause notice issued by SEBI on July 31, 2024.

SEBI found that during December 2021, buy recommendations for Unison Metals shares were circulated on multiple Telegram channels. These channels had subscriber bases ranging from four to fifteen lakh. The recommendations were deleted on the same day. The channels were operated by one of the noticees.

An investigation was initiated after SEBI received complaints regarding these recommendations.

The noticees were categorised as Net Sellers or Profit Makers, Operators, and Enablers. SEBI found that the Net Sellers traded on the basis of advance information about pre-decided stock recommendations. The Operators facilitated the posting of tips on Telegram channels. The Enablers bridged the gap between them.

According to SEBI, the activity led to an artificial rise in the price and trading volume of the scrip. It enabled unlawful gains of Rs 4.29 crore.

The investigation relied on search and seizure operations, call data records, chat messages and sworn statements. SEBI concluded that the entities had acted in concert to mislead investors and manipulate the market.

Based on these allegations, the noticees were called upon to show cause why directions, including disgorgement and market restraint, should not be imposed.

Nine noticees approached the Securities Appellate Tribunal. Without examining the merits, the tribunal permitted deposit of the alleged gains in an escrow account. It allowed trading in securities other than Unison Metals Limited and directed the defreezing of accounts.

In its final order, SEBI held that the material on record clearly established that a scheme was devised and executed in December 2021 to manipulate the price and volume of the shares.

SEBI noted that the Net Sellers' combined holding fell from about 27.28 lakh shares at the beginning of the investigation period to around 2.94 lakh shares by its end. This indicated that over 80% of their holdings were offloaded during the price rise.

Holding that the standard of proof on a preponderance of probabilities was satisfied, SEBI concluded that the conduct showed a deliberate intent to manipulate the scrip.

SEBI barred several noticees from accessing the securities market for periods ranging from one to three years. It directed disgorgement of unlawful gains to the Investor Protection and Education Fund and imposed monetary penalties. Proceedings against two noticees were dropped without directions.