Adjudication Order in respect of Sachin Kumar Jhawar HUF in the matter of Illiquid Stock Options at BSE

Description

SEBI adjudication order imposing penalty on Sachin Kumar Jhawar HUF for executing non-genuine trades in illiquid stock options at BSE during April 2014 to September 2015.

Summary

SEBI issued an adjudication order against Sachin Kumar Jhawar HUF (PAN: AALHS9592Q) for executing non-genuine reversal trades in illiquid stock options at BSE during April 1, 2014 to September 30, 2015. The entity executed 4 non-genuine trades in 2 stock option contracts resulting in artificial volume of 133,500 units. The investigation was part of a larger probe into large-scale reversal of trades in BSE’s stock options segment, where 2,91,744 trades (81.40% of all trades) were found to be non-genuine during the investigation period.

Key Points

• Sachin Kumar Jhawar HUF executed 4 non-genuine trades in 2 stock option contracts at BSE
• Total artificial volume created: 133,500 units
• Investigation period: April 1, 2014 to September 30, 2015
• Alleged violations of SEBI (PFUTP) Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a)
• Show Cause Notice issued on August 10, 2022
• Adjudicating Officer: Initially Ms. Asha Shetty, later transferred (April 03, 2025)
• Part of larger investigation where 81.40% of all BSE stock option trades were found non-genuine
• Trades created false/misleading appearance through artificial volumes

Regulatory Changes

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

Compliance Requirements

This is an adjudication order against a specific entity. No general compliance requirements for market participants. The order serves as precedent for enforcement against:

• Execution of reversal trades in illiquid stock options
• Creation of artificial volumes through non-genuine trades
• Market manipulation through fictitious trading activity

Important Dates

• Investigation Period: April 1, 2014 to September 30, 2015
• Show Cause Notice: August 10, 2022
• AO Transfer Order: April 03, 2025
• Adjudication Order Number: Order/AK/RK/2025-26/31843

Impact Assessment

Market Impact: Minimal current market impact as this relates to historical trading violations from 2014-2015. The order is part of SEBI’s cleanup of past manipulative practices in illiquid stock options segment.

Operational Impact: Limited to the specific noticee (Sachin Kumar Jhawar HUF). However, demonstrates SEBI’s continued commitment to pursuing enforcement actions for market manipulation even for historical cases.

Precedent Value: Reinforces that:

• SEBI will pursue enforcement for creation of artificial volumes through reversal trades
• Illiquid stock options segment manipulation will be penalized
• Non-genuine trades designed to create false appearance of trading activity constitute PFUTP violations

Entity-Specific: The noticee was one of multiple entities involved in the broader scheme where over 81% of BSE stock option trades during the investigation period were found to be non-genuine.

Impact Justification

Individual enforcement action against HUF entity for historical violations (2014-2015) involving limited trades (4 trades in 2 contracts). No systemic market impact or regulatory changes.