Stock market regulator SEBI has prohibited three entities – Hemaliben Bimalkumar Mehta, Charuben Jitendrarai Mehta and Bhavana Gautambhai Vaghasiya – from dealing in securities for fraudulent and unfair trade practices in the Bodal Chemicals scrip pending investigation and passing of final order.

SEBI directed NSE and BSE to withhold the pay-out of securities and funds in the Bodal Chemicals scrip for the trading conducted on August 29 to ensure that the securities/funds are not disposed of by the alleged perpetrators of manipulation.

SEBI is investigating whether the three entities actually indulged in engineering false news and covered it in the garb of an official company announcement.

On August 27, BSE received a fax from a sender named Radheshyam Stationery which contained a “press release” from Bodal Chemicals.

The release stated that the company's board was meeting on August 29 to consider a bonus issue and the company was contemplating a sale of its single super phosphate plant in Vadodara for Rs 640 crore.

The release also said that Crisil had given a GVC Level 3 rating to Bodal for corporate governance and value creation and that its shares were now listed on NSE. These announcements were put up on the BSE Web site between 8.13 a.m. and 8.18 a.m. on August 29 as August 27 was a holiday.

When trading commenced, the price of the scrip moved up 13.81 per cent from its previous close of Rs 21 to a share to Rs 23.9 till 1424 hours when the company denied having issued such a press release.

The stock price fell 25.31 per cent immediately in intraday trade from Rs 23.9 to Rs 17.85 before ending the trading session at Rs 18.35.

A total of 9.87 lakh shares changed hands in the pre-denial period (70.81 per cent of the day's volume) whereas in the post-denial period only 4.07 lakh shares were traded (29.19 per cent of the day's volume).

On analysing the selling pattern in the Bodal Chemicals scrip, it was found that prima facie it was an attempt to push fraudulent announcements with positive news in the public domain in order to mislead investors and a concentration of selling by a few entities.

In order to prevent the attempt of a few to get away with ill-gotten profits, SEBI directed exchanges to withhold the payout of funds and securities and barred the three entities on August 30.

The directions come into immediate effect and the above persons have been given 15 days from the date of the order (August 30) to file objections.