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Sebi lifts ban against 307 entities barred from trading for alleged market manipulation

LiveMint logoLiveMint 06-09-2017 Jayshree P. Upadhyay

Mumbai: The Securities and Exchange Board of India (Sebi) on Wednesday revoked its ban on 307 entities imposed on suspicion of market manipulation and using stock exchanges for tax evasion. These entities were barred from trading in the securities market in 2014 and 2015.

Across the two years, Sebi barred about 1,500 entities who were suspected of manipulating the stock prices of 12 listed companies.

These 307 entities are different from the 331 suspected shell companies which were restricted from trading on 7 August.

In two separate orders on Wednesday, Sebi granted relief to the 307 entities as it could not find evidence of market manipulation and price rigging.

Typically, penny stocks are used for tax evasion and market manipulation by first allotting preferential stock to non-promoters who are trying to evade taxes. Their associates would then drive up the price of these shares through circular trading, where buyers and sellers are connected.

After a year, the preferential allottee cashes out at a much higher price. The entity buying the stock is generally funded by the preferential allottee, thus helping bring black money into the system.

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