Description

SEBI imposes penalties on Tarun Kumar Ghai for executing non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, creating artificial volumes.

Summary

SEBI issued an adjudication order against Tarun Kumar Ghai (PAN: AAIPG1916F) for engaging in non-genuine reversal trades in illiquid stock options on BSE during the period April 1, 2014 to September 30, 2015. The investigation revealed that 81.38% of all trades executed in BSE’s stock options segment during this period were reversal trades involving 14,720 entities. Tarun Kumar Ghai was found to have executed reversal trades that created false or misleading appearance of trading activity through artificial volumes, violating SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

Key Points

  • SEBI investigated large-scale reversal of trades in Illiquid Stock Options on BSE from April 1, 2014 to September 30, 2015
  • Total of 2,91,643 trades (81.38% of all stock options trades on BSE) involved reversal of buy and sell positions
  • 14,720 entities were found to have executed non-genuine trades during the investigation period
  • Tarun Kumar Ghai was identified as one of the entities executing manipulative reversal trades
  • Reversal trades involved entities reversing their buy or sell positions with the same counterparty, lacking basic trading rationale
  • Show Cause Notice issued on August 08, 2022 by erstwhile Adjudicating Officer
  • Case transferred to new Adjudicating Officer on April 04, 2025
  • Alleged violations of regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations

Regulatory Changes

No new regulatory changes. This order enforces existing SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, specifically provisions related to fraudulent, deceptive and manipulative trading practices.

Compliance Requirements

  • Market participants must ensure all trades in stock options have genuine trading rationale
  • Entities must avoid executing reversal trades with same counterparties that create artificial volumes
  • Trading activities should not create false or misleading appearance of trading in securities
  • Participants must refrain from manipulative and deceptive trading practices in derivatives segments

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice Issued: August 08, 2022
  • Adjudicating Officer Transfer: April 04, 2025
  • Order Date: January 2026

Impact Assessment

This adjudication order has minimal market-wide impact as it addresses historical violations from 2014-2015 and affects a single individual entity. The order is part of SEBI’s broader enforcement action against 14,720 entities involved in similar manipulative practices during the investigation period. While the case highlights SEBI’s continued vigilance against market manipulation in derivatives segments, particularly illiquid stock options, the specific impact is limited to enforcement and deterrence rather than operational changes for market participants. The case serves as a reminder of regulatory consequences for engaging in non-genuine trades that create artificial volumes.

Impact Justification

Individual adjudication order for past violations (2014-2015) with limited market-wide impact; affects single entity only