Description

SEBI imposes penalty on Rajendra Kumar Garg for executing non-genuine reversal trades in illiquid stock options at BSE during April 2014 to September 2015, creating artificial volumes and misleading market appearance.

Summary

SEBI has issued an adjudication order against Rajendra Kumar Garg (PAN: ACSPG2948R) for violations related to non-genuine trading in Illiquid Stock Options at BSE. During the investigation period from April 1, 2014 to September 30, 2015, the entity executed reversal trades that created artificial volumes and false appearance of trading. The order finds violations of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, specifically regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a).

Key Points

  • Rajendra Kumar Garg was one of 14,720 entities found executing non-genuine trades in BSE’s stock options segment
  • Investigation covered period: April 1, 2014 to September 30, 2015
  • 2,91,643 reversal trades comprising 81.38% of all trades in stock options segment were non-genuine
  • Reversal trades involved entities reversing buy/sell positions in same contract with same counterparty
  • Such trades lacked basic trading rationale and created artificial volume
  • Show Cause Notice issued on July 23, 2021
  • Adjudicating Officer appointed on April 4, 2025 under Section 15-I of SEBI Act, 1992
  • Post SCN Intimation dated August 3, 2022

Regulatory Changes

No new regulatory changes introduced. This order enforces existing SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

Compliance Requirements

  • Market participants must avoid executing reversal trades that lack genuine trading rationale
  • Trades must not create false or misleading appearance of trading activity
  • Stock options trading must have legitimate economic purpose and not be used for creating artificial volumes
  • Entities must ensure compliance with PFUTP Regulations to avoid manipulative and deceptive trading practices

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice: July 23, 2021
  • Post SCN Intimation: August 3, 2022
  • Adjudicating Officer Appointment: April 4, 2025
  • Adjudication Order: December 2025 (Order No. Order/JS/RJ/2025-26/31845)

Impact Assessment

This is an individual enforcement action with limited market impact. The order addresses historical violations from 2014-2015 in the illiquid stock options segment at BSE. While part of a larger investigation involving 14,720 entities, this specific order affects only one individual trader. The case demonstrates SEBI’s continued enforcement against market manipulation practices, even for older violations. The low trading volumes in illiquid stock options mean broader market impact is minimal, though it serves as a deterrent for similar manipulative practices.

Impact Justification

Individual adjudication order against single entity for past violations (2014-2015). No systemic market impact or regulatory changes. Part of broader enforcement action against 14,720 entities involved in similar trades.