BSE cuts penalty on KGN Ind

Ashish Rukhaiyar
MUMBAI
Dec 03, 2008

THE Bombay Stock Exchange has revised its earlier order pertaining to KGN Industries, wherein it had penalised more than 200 brokers for their alleged role in manipulating the share price on the relisting day.

According to people familiar with the development, the exchange has more than halved the penalty amount for most broking houses that were named in the earlier order in June 2008. The development follows representations made by these brokers with some even knocking the doors of the Securities Appellate Tribunal (SAT).

The case goes back to June 2008 when BSE slapped a fine of up to Rs 5 lakh on 222 brokers for allegedly manipulating the stock price of KGN Industries on the day of its relisting on May 21. The stock opened at Rs 72 and went on to hit an incredible price of Rs 55,000 within two hours.

BSE suspended trading in the stock around 12.20 pm when it fell back to Rs 15,000. Later on that day, BSE issued a release saying: “Further investigations will be carried out, but trading in the stock will resume on Thursday at the adjusted price of Rs 5,216.30.”

The exchange, in its new order announced a few days ago, has tried to penalise only those entities that punched in orders but failed to take actual delivery of the stock. Brokers, however, are still unhappy as most of them did not get delivery due to genuine reasons and still have to pay penalty.

"Only 827 shares were traded on May 21 and so most brokers did not get delivery," said a compliance officer of a brokerage whose penalty was reduced to Rs 1.25 lakh from the earlier Rs 5 lakh. "So still many brokers who had no malicious intent have to pay penalty albeit of a lower value," he added.

Around 4-5 aggrieved brokerages, including Asit C Mehta, Networth Stock Broking and SBICAP Securities, had moved the Securities Appellate Tribunal (SAT), challenging the exchange’s order. SAT apparently asked BSE to explain the rationale of its order. Meanwhile, a mail sent to the exchange asking for details related to the revised order remained unanswered till the time of going to press.

BSE, in its earlier order, observed that some of the trading members entered orders at unrealistic prices, disturbing the market equilibrium. "In view of the same, it has been decided to impose a fine up to Rs 5 lakh on such trading members," said the exchange.

The trading members who were named in the order included Angel Broking, Brics Securities, Centrum, Dawnay Day, Emkay, Geojit, India Infoline, Religare, Sharekhan and Anand Rathi among others.