Description

SEBI imposes penalty on Madhuri Tandon for engaging in non-genuine reversal trades in illiquid stock options at BSE during April 2014 to September 2015, creating artificial volumes.

Summary

SEBI has issued an adjudication order against Madhuri Tandon (PAN: ABAPT1692A) for engaging in non-genuine reversal trades in illiquid stock options at BSE during the period April 1, 2014 to September 30, 2015. The investigation revealed that 81.38% of all trades (2,91,643 trades) executed in BSE’s stock options segment during this period were reversal trades involving 14,720 entities. Madhuri Tandon was identified as one of the entities who executed such trades that created false or misleading appearance of trading through artificial volumes, violating PFUTP regulations.

Key Points

  • Madhuri Tandon found guilty of executing non-genuine reversal trades in illiquid stock options at BSE
  • Investigation period: April 1, 2014 to September 30, 2015
  • 81.38% of all trades (2,91,643 out of total trades) in BSE stock options segment were reversal trades during the investigation period
  • 14,720 entities identified as having executed non-genuine trades during this period
  • Reversal trades involved entities reversing their buy/sell positions in contracts with the same counterparty
  • Such trades lacked basic trading rationale and created artificial volumes
  • Adjudication order number: Order/JS/DP/2025-26/31847
  • Show Cause Notice dated August 30, 2022 was issued to the noticee

Regulatory Changes

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

Compliance Requirements

  • Market participants must ensure all trades have genuine economic rationale
  • Reversal trades with same counterparties that create artificial volumes are prohibited
  • Entities must avoid trading patterns that create false or misleading appearance of trading activity
  • Violations of PFUTP Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) attract penalties under Section 15HA of SEBI Act

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice: August 30, 2022
  • Adjudicating Officer Appointment: April 4, 2025
  • Adjudication Order Date: December 2025

Impact Assessment

This adjudication order is part of SEBI’s systematic action against the widespread manipulation in illiquid stock options at BSE that occurred in 2014-2015. While the order impacts only one individual entity, it represents SEBI’s continued enforcement efforts against the 14,720 entities identified in this investigation. The order reinforces market integrity by deterring manipulative practices, though its direct market impact is minimal as it addresses historical violations in a now-defunct or reformed market segment. The action demonstrates regulatory vigilance in pursuing individual violators even years after the offense, serving as a deterrent for similar manipulative activities.

Impact Justification

Individual adjudication order against a single entity for historical violations (2014-2015) in illiquid stock options; limited market-wide impact but reinforces regulatory action against manipulative practices