SEBI Adjudication Order in the matter of Cool Caps Industries Limited

SEBI recently passed an adjudication order concerning the trading activities of certain entities in the scrip of Cool Caps Industries Limited, listed on the NSE SME Emerge platform.

Key Findings:

• SEBI’s investigation focused on potential violations under the SEBI Act, 1992, PFUTP Regulations, 2003, and the SAST Regulations, 2011 during the period April 2022 to January 2023.

• The scrip witnessed an unprecedented price rise of 1126.49% in just 192 trading days.

• A group of connected entities were alleged to have engaged in trades that significantly contributed to the Last Traded Price (LTP) rise, thereby creating artificial price movements and failing to make mandatory shareholding disclosures under SAST.

• However, after examining trading patterns, connections, and counterparty analysis, SEBI gave benefit of doubt to certain noticees on manipulation charges, observing that upward trades alone cannot always indicate fraudulent intent (relying on SAT precedents).

• Nonetheless, violations relating to non-disclosure of shareholding changes under Regulation 29 of SAST were established.

  
  

Regulatory Takeaways:

• The order reinforces SEBI’s strict approach to market surveillance and connected party trades, particularly in SME listings where volumes are limited.

• It underscores the importance of timely disclosures by entities crossing the prescribed shareholding thresholds.

• The reliance on judicial precedents highlights the regulator’s balanced approach—while protecting market integrity, SEBI also ensures principles of natural justice are upheld.