Description

SEBI adjudication order against Kusum Devi Agarwal for executing non-genuine reversal trades in Illiquid Stock Options on BSE during April 2014 to September 2015, violating PFUTP Regulations.

Summary

SEBI’s Adjudicating Officer issued an adjudication order against Kusum Devi Agarwal (PAN: AFLPA4345Q) for alleged participation in non-genuine reversal trades in Illiquid Stock Options (ISO) on BSE during the Investigation Period (IP) from April 1, 2014 to September 30, 2015. The trades were alleged to have created artificial volumes and a false appearance of trading activity, in violation of SEBI’s Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, 2003.

Key Points

  • SEBI investigated large-scale reversal trades in Illiquid Stock Options on BSE, covering the period April 1, 2014 to September 30, 2015.
  • A total of 2,91,643 trades comprising 81.38% of all trades in BSE’s stock options segment were identified as reversal trades involving artificial volume creation.
  • 14,720 entities were found to have executed non-genuine trades; Kusum Devi Agarwal was one of them.
  • The Noticee’s reversal trades are alleged to have created false or misleading appearance of trading activity.
  • Alleged violations: Regulations 3(a), (b), (c), (d), 4(1), and 4(2)(a) of SEBI (PFUTP) Regulations, 2003.
  • Penalty provisions invoked under Section 15HA of the SEBI Act, 1992.
  • The adjudicating officer was appointed vide communiqué dated April 4, 2025, following transfer from the erstwhile AO.
  • Show Cause Notice was issued on September 9, 2021 by the erstwhile AO.

Regulatory Changes

No new regulatory changes introduced. This is an enforcement order applying existing provisions of the SEBI Act, 1992 and PFUTP Regulations, 2003.

Compliance Requirements

  • Market participants must not engage in reversal trades or any trades that create artificial volumes or a false appearance of trading activity.
  • Trades must have genuine economic rationale and must not be manipulative or deceptive in nature.
  • Entities found in violation of PFUTP Regulations are subject to penalties under Section 15HA of the SEBI Act.

Important Dates

  • Investigation Period: April 1, 2014 – September 30, 2015
  • Show Cause Notice issued: September 9, 2021
  • New AO appointed: April 4, 2025
  • Order reference: Order/JS/RJ/2025-26/32173

Impact Assessment

This order is part of SEBI’s broader enforcement sweep against entities involved in manipulative trading in illiquid stock options on BSE. While the direct market impact is limited to one individual, it reflects SEBI’s sustained effort to deter market manipulation, particularly artificial volume creation through reversal trades. The case underscores the long enforcement timeline (investigation period 2014-15, SCN in 2021, order in 2025-26) and SEBI’s commitment to pursuing violations even years after occurrence. Traders and brokers should ensure all options trades are genuine and backed by legitimate trading rationale.

Impact Justification

Enforcement action against an individual trader for market manipulation via reversal trades in illiquid stock options; significant from a regulatory enforcement perspective but limited broader market impact as it pertains to a single individual.