The SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003 enable SEBI to investigate into cases of market manipulation and fraudulent and unfair trade practices. The regulations specifically prohibit market manipulation, misleading statements to induce sale or purchase of securities, unfair trade practices relating to securities. SEBI can conduct investigation, suo moto or upon information received by it, by an investigating officer in respect of conduct and affairs of any person dealing, buying/selling/dealing in securities. Based on the report of the investigating officer, SEBI can initiate action for suspension or cancellation of registration of an intermediary.
The term “fraud” has been defined by Regulation 2(1)(c). Fraud includes any act, expression, omission or concealment committed whether in a deceitful manner or not by a person or by any other person or his agent while dealing in securities in order to induce another person with his connivance or his agent to deal in securities, whether or not there is any wrongful gain or avoidance of any loss, and shall also include –
1. a knowing misrepresentation of the truth or concealment of material fact in order that another person may act to his detriment;
2. the suggestion as to a fact which is not true by one who does not believe it to be true;
3. an active concealment of a fact by one having knowledge or belief of the fact;
4. a promise made without any intention of performing it;
5. a representation made in a reckless and careless manner whether it be true or false;
6.… Read the rest