Description

SEBI adjudication order against Ramesh Kumar Deosaria for executing non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, creating artificial volumes and misleading appearance of trading.

Summary

SEBI issued Adjudication Order No. Order/JS/YK/2025-26/31975 against Ramesh Kumar Deosaria (PAN: AIBPD5871D) under Section 15-I of SEBI Act, 1992 for engaging in non-genuine reversal trades in Illiquid Stock Options on BSE. During the investigation period from April 1, 2014 to September 30, 2015, SEBI observed large-scale reversal of trades creating artificial volumes. The investigation revealed that 2,91,643 trades comprising 81.38% of all trades executed in BSE’s stock options segment were reversal trades involving buy-sell position reversals with same counterparties. Ramesh Kumar Deosaria was identified as one of 14,720 entities who executed such manipulative trades.

Key Points

  • Adjudication proceedings initiated under Section 15-I of SEBI Act, 1992 read with Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995
  • Investigation period: April 1, 2014 to September 30, 2015
  • 81.38% of all trades in BSE stock options segment during investigation period were reversal trades
  • Total of 2,91,643 reversal trades identified across the segment
  • 14,720 entities found involved in executing non-genuine trades
  • Ramesh Kumar Deosaria executed reversal trades where buy/sell positions were reversed with same counterparty
  • Trades lacked basic trading rationale and created false or misleading appearance of trading
  • Alleged violations of Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of SEBI PFUTP Regulations, 2003
  • Show Cause Notice issued on August 01, 2022
  • Adjudicating Officer appointed on April 04, 2025

Regulatory Changes

No new regulatory changes introduced. This is an enforcement action applying existing SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

Compliance Requirements

  • Market participants must refrain from executing reversal trades that create artificial volumes
  • Trading activities must have genuine trading rationale and economic substance
  • Entities must not engage in transactions that create false or misleading appearance of trading activity
  • Compliance with SEBI PFUTP Regulations is mandatory for all market participants
  • Avoid coordinated buy-sell reversals with same counterparties in illiquid contracts

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice Issued: August 01, 2022
  • Adjudicating Officer Appointment: April 04, 2025
  • Order Date: January 2026 (as per document reference)

Impact Assessment

Market Impact: This enforcement action is part of SEBI’s broader crackdown on manipulation in illiquid stock options segment on BSE. The investigation covering 14,720 entities and 81.38% of all trades in the segment indicates systemic manipulation that significantly distorted price discovery and market integrity during 2014-2015.

Individual Impact: Ramesh Kumar Deosaria faces potential penalties under Section 15HA of SEBI Act for violations of PFUTP Regulations. The adjudication order establishes regulatory precedent for identifying and penalizing reversal trade manipulation.

Operational Impact: The case reinforces SEBI’s surveillance capabilities in detecting coordinated manipulative trading patterns, particularly in illiquid segments. Market participants engaging in stock options trading must ensure genuine economic rationale for all transactions and maintain proper audit trails to demonstrate bona fide trading intent.

Impact Justification

Individual enforcement action for manipulative trading practices in illiquid stock options. Part of broader investigation involving 14,720 entities. Establishes regulatory precedent for reversal trade manipulation but impact limited to specific individual.