Description

SEBI imposes penalty on Sheo Kumar Kejriwal HUF for alleged non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, violating PFUTP Regulations.

Summary

SEBI has issued Adjudication Order No. Order/JS/VC/2025-26/31894 against Sheo Kumar Kejriwal HUF (PAN: AAXHS5756C) for alleged violations related to non-genuine trading in Illiquid Stock Options on BSE. The investigation covered the period from April 1, 2014 to September 30, 2015, during which the entity allegedly executed reversal trades that created false appearance of trading and artificial volumes. The case was initiated under Section 15-I of SEBI Act, 1992 for violations of PFUTP Regulations.

Key Points

  • Investigation revealed 2,91,744 trades (81.41% of all trades) in BSE stock options segment involved reversal of buy/sell positions during the investigation period
  • 14,720 entities were found to have executed non-genuine trades in BSE’s stock options segment
  • Sheo Kumar Kejriwal HUF was identified as one of the entities indulging in reversal trades
  • These trades allegedly lacked basic trading rationale and created false or misleading appearance of trading
  • Reversal trades involved entities reversing their buy/sell position in a contract with subsequent sell/buy position with the same counterparty
  • Show Cause Notice dated July 26, 2021 was issued to the Noticee
  • Adjudicating Officer was appointed on April 03, 2025 following transfer from erstwhile AO

Regulatory Changes

No new regulatory changes. This is an enforcement action for violations of existing PFUTP Regulations during 2014-2015.

Compliance Requirements

  • Entities must ensure trades in stock options have genuine trading rationale
  • Avoid reversal trades with same counterparty that create artificial volumes
  • Trading activities should not create false or misleading appearance of trading
  • Comply with regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations prohibiting fraudulent and unfair trade practices

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice issued: July 26, 2021
  • Adjudicating Officer appointed: April 03, 2025
  • Order Number: Order/JS/VC/2025-26/31894

Impact Assessment

Market Impact: Low - This is an enforcement action against a single HUF entity for historical violations in illiquid stock options segment. No broader market implications or systemic changes.

Operational Impact: Limited to the specific entity. Serves as deterrent example for market participants against engaging in non-genuine reversal trades that create artificial volumes.

Regulatory Significance: Part of SEBI’s continued effort to enforce market integrity and punish manipulative trading practices, particularly in illiquid segments where such practices are more likely to distort price discovery.

Impact Justification

Adjudication order against individual HUF entity for past violations (2014-2015) in illiquid stock options. High severity due to market manipulation charges but low market impact as it pertains to historical illiquid contracts and single entity.