Description

SEBI imposes penalty on Mr. Gagan Omprakash Arora for executing non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, violating PFUTP regulations.

Summary

SEBI issued an adjudication order against Mr. Gagan Omprakash Arora (PAN: AMCPA8093M) for engaging in non-genuine reversal trades in Illiquid Stock Options (ISO) on BSE during the period April 1, 2014 to September 30, 2015. The investigation revealed widespread manipulation where 2,91,744 trades comprising 81.41% of all trades in BSE’s stock options segment involved reversal of positions creating artificial volume. Mr. Arora was one of 14,720 entities found executing such manipulative trades.

Key Points

  • Investigation period: April 1, 2014 to September 30, 2015
  • 2,91,744 reversal trades identified, representing 81.41% of all stock options trades on BSE
  • Total 14,720 entities involved in non-genuine trading activities
  • Reversal trades involved entities taking buy/sell positions and then reversing with same counterparty
  • Trades lacked basic trading rationale and created false appearance of trading activity
  • Show Cause Notice issued on August 11, 2021
  • Adjudicating Officer appointed on April 03, 2025 after transfer from previous AO

Regulatory Changes

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

Compliance Requirements

  • Market participants must ensure all trades in stock options have genuine economic rationale
  • Reversal trades with same counterparties that create artificial volumes are prohibited
  • Entities must avoid creating false or misleading appearance of trading activity
  • Compliance with regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations mandatory

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice: August 11, 2021
  • AO Appointment: April 03, 2025
  • Order Date: December 19, 2025

Impact Assessment

Market Impact: Low - This is an individual enforcement action against one participant in a historical manipulation scheme from 2014-2015. The broader investigation covered 14,720 entities, and this represents closure of one case among thousands.

Regulatory Significance: Demonstrates SEBI’s continued enforcement against market manipulation even for cases dating back several years. Reinforces zero-tolerance policy for creation of artificial volumes and false trading activity.

Precedent Value: Part of systemic enforcement action against widespread ISO manipulation on BSE, establishing that reversal trades lacking economic rationale constitute fraudulent and unfair trade practices.

Investor Protection: Enforcement actions against manipulation help maintain market integrity and protect genuine investors from distorted price discovery mechanisms.

Impact Justification

Individual enforcement action against one entity among 14,720 entities involved in historical ISO manipulation case from 2014-2015; limited market-wide impact but demonstrates regulatory enforcement