Description

SEBI imposes penalty on Sanjay V Mohare HUF for executing non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, creating artificial volumes and false appearance of trading.

Summary

SEBI issued Adjudication Order No. Order/JS/DP/2025-26/31995 against Sanjay V Mohare HUF (PAN: AAGHS4356D) for engaging in non-genuine reversal trades in Illiquid Stock Options on BSE between April 1, 2014 and September 30, 2015. The entity was found to have executed trades where buy/sell positions were reversed with the same counterparty, creating artificial volumes and false appearance of trading. This conduct violated SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003. The investigation revealed that 81.41% of all trades (2,91,744 trades) in BSE’s stock options segment during the period involved such reversal trades, with 14,720 entities participating in these manipulative activities.

Key Points

  • Investigation period: April 1, 2014 to September 30, 2015
  • 2,91,744 reversal trades identified, comprising 81.41% of all stock options trades on BSE
  • 14,720 entities found executing non-genuine trades in BSE stock options segment
  • Sanjay V Mohare HUF executed reversal trades lacking basic trading rationale
  • Trades involved reversing buy/sell positions with same counterparty in same contract
  • Created false or misleading appearance of trading through artificial volumes
  • Show Cause Notice issued on August 04, 2022
  • Adjudicating Officer appointed on April 04, 2025 under Section 15-I of SEBI Act
  • Proceedings initiated under SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995

Regulatory Changes

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

Compliance Requirements

  • Entities must refrain from executing reversal trades that lack genuine trading rationale
  • Trades must not create false or misleading appearance of trading activity
  • Market participants must avoid manipulative and deceptive trading practices in stock options
  • Trading activities should not generate artificial volumes in illiquid contracts
  • Entities must ensure all trades have legitimate economic purpose and are not designed to circumvent market integrity requirements

Important Dates

  • Investigation Period: April 1, 2014 to September 30, 2015
  • Show Cause Notice Issued: August 04, 2022
  • Adjudicating Officer Appointment: April 04, 2025
  • Order Number: Order/JS/DP/2025-26/31995

Impact Assessment

Market Impact: Limited direct market impact as the order addresses historical violations from 2014-2015 by a single HUF entity. However, it reinforces SEBI’s continued surveillance and enforcement against manipulative trading in illiquid stock options.

Operational Impact: The order serves as deterrent for entities considering similar reversal trading strategies in stock options. It demonstrates SEBI’s capability to identify and prosecute non-genuine trades even when they involve large numbers of participants (14,720 entities identified).

Regulatory Significance: Affirms SEBI’s zero-tolerance approach to market manipulation through artificial volume creation. The systematic investigation covering 81.41% of trades in the segment shows comprehensive monitoring of illiquid stock options trading patterns. This enforcement action supports market integrity and genuine price discovery in derivatives markets.

Impact Justification

Enforcement action against individual entity for manipulative trading practices in stock options. High severity due to fraudulent conduct but low impact as it affects single HUF entity, not broader market participants or regulations.