Description

SEBI imposes penalty on Rakesh Kumar Khetan HUF for engaging in non-genuine reversal trades in illiquid stock options on BSE, creating artificial volumes and misleading appearance of trading during April 2014 to September 2015.

Summary

SEBI has issued Adjudication Order No. Order/JS/YK/2025-26/31787 against Rakesh Kumar Khetan HUF (PAN: AALHR4375J) for violations related to dealing in illiquid stock options on BSE. The investigation covered the period from April 1, 2014 to September 30, 2015, during which the entity engaged in non-genuine reversal trades that created false or misleading appearance of trading and artificial volumes in stock options contracts. The proceedings were initiated for alleged violations of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

Key Points

  • Investigation revealed 2,91,744 reversal trades comprising 81.41% of all trades executed in BSE’s stock options segment during the investigation period
  • 14,720 entities were found to have executed non-genuine trades in BSE’s stock options segment
  • Rakesh Kumar Khetan HUF was identified as one of the entities indulging in reversal trades
  • Reversal trades involved entities reversing their buy or sell positions in a contract with subsequent sell or buy positions with the same counterparty
  • These trades were alleged to lack basic trading rationale and created artificial volume
  • Show Cause Notice dated August 08, 2022 was issued to the Noticee
  • Adjudicating Officer appointed on April 04, 2025 following transfer from erstwhile AO

Regulatory Changes

No new regulatory changes introduced. This is an enforcement action under existing SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

Compliance Requirements

The order serves as a reminder to market participants to:

  • Refrain from executing non-genuine trades that create artificial volumes
  • Avoid reversal trading patterns that lack legitimate trading rationale
  • Ensure all trades in stock options are genuine and not manipulative or deceptive in nature
  • Comply with regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice: August 08, 2022
  • Adjudicating Officer Appointment: April 04, 2025
  • Order Date: November 19, 2025

Impact Assessment

This is an individual enforcement action with limited market impact. The order relates to historical violations from 2014-2015 and is part of SEBI’s broader crackdown on manipulative trading practices in illiquid stock options. The case involves one entity among 14,720 entities identified during the investigation. The order reinforces SEBI’s commitment to maintaining market integrity and deterring manipulative trading practices, but does not introduce new compliance obligations or affect current market operations.

Impact Justification

Individual adjudication order against a single HUF entity for past violations (2014-2015). No systemic market impact or regulatory changes. Part of bulk enforcement action against 14,720 entities.