Patel Wealth Advisors and 4 Directors Debarred by SEBI Over Order Spoofing Charges

Market watchdog, Securities and Exchange Board of India (SEBI) prohibited stockbroker Patel Wealth Advisors and its four directors from participating in the securities market. This comes after their involvement in the alleged fraudulent trading practice of 'order spoofing.'

As per the market regulator's interim order issued on Monday, Sebi has ordered the seizure of Rs 3.22 crore in illegal profits from them. "In the present matter, it is prima facie evident that Patel Wealth Advisors Private Ltd (PWAPL) has engaged in extensive spoofing activities in 173 scrips across 292 scrip-days in both cash as well as derivatives segment over a period of three years, which has resulted in unlawful gains of Rs 3.22 crores," the interim order read.

The company was accused of placing large buy and sell orders for stocks at prices much higher or lower than the market price, without intending to execute them. These orders created a false impression of increased demand or supply eventually misleading investors and manipulating stock prices.

While these orders were pending, PWAPL allegedly made quick trades on the opposite side of the market to earn illegal profits. And once the trades were executed, PWAPL is said to have cancelled all the fake orders.

What is order spoofing?

Order spoofing is a fraudulent trading practice wherein a trader places large orders to buy or sell a stock at prices far higher or lower than the market price. But the catch is that those trades aren't actually executed.

This is largely done to create a false impression about market demand and supply. Once the market reacts the price moves in the desired direction, and traders cancel these fake orders and profit from the price movement without ever having to complete the trade.

Order spoofing is just one of many methods used for market manipulation. Earlier this year, Asmita Pant, also known as the 'She-Wolf,' was banned from the securities market for her alleged involvement in market manipulation instance.