SEBI Prohibition of Fraudulent &
Praveen Dubey (SEBI Registered RA)
SP RESEARCHVIA PVT. LTD. (INH000015808)
SEBI PFUTP Regulations 2003: Protecting Markets from Fraud & Manipulation
The SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 are one of SEBI's most powerful enforcement tools. These regulations broadly define and prohibit a wide range of fraudulent, manipulative, and deceptive practices that harm market integrity and investor interests.
What Constitutes Fraud Under PFUTP?
1. Price Manipulation: Artificially inflating or deflating prices through collusive trading, circular trading, or wash trades designed to mislead other investors about the real supply and demand for a security. 2. Pump & Dump: Promoting a security through false or misleading statements to inflate its price, then selling at the inflated price. This is prevalent in small and micro-cap stocks and via WhatsApp/Telegram tip services. 3. Front Running: A broker or fund manager trading in a security before executing a large client order, knowing the client order will move the price. 4. Spoofing: Placing large orders with no intention to execute to mislead other traders about market depth.
SEBI's Investigation Powers Under PFUTP
SEBI can call for books and records, summon persons for examination, conduct search and seizure operations (with court approval), freeze bank accounts, and appoint inspectors. SEBI's data analytics team uses surveillance systems to identify unusual price and volume patterns that may indicate manipulation.
Landmark Enforcement Actions
SEBI has taken strong enforcement action in cases like the NSE co-location scam (2015), the Karvy Stock Broking client securities misuse case (2019), and several pump & dump operations in small-cap stocks. These cases resulted in disgorgement of profits, bans from the securities market, and monetary penalties totaling hundreds of crores.
Regulatory Statutory Warning & Disclaimers
Investment in the securities market is subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
Written by Praveen Dubey
Chief Research Analyst | SEBI Reg: INH000015808
Statutory Warning & Risk Disclaimer: Investment in securities market is subject to market risks. Read all related documents carefully before investing. Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Content provided on this blog is for informational and educational purposes only.