Description

SEBI imposes penalty on Sanjay Kumar 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 order (No. Order/JS/DP/2025-26/32228) against Sanjay Kumar (PAN: AVBPK4726F) for executing non-genuine reversal trades in Illiquid Stock Options (ISO) on BSE during the investigation period of April 1, 2014 to September 30, 2015. The trades were found to be manipulative and deceptive, creating artificial trading volumes in violation of SEBI’s PFUTP Regulations.

Key Points

  • SEBI investigated large-scale reversal trades in BSE’s Illiquid Stock Options segment that created artificial volumes.
  • During the investigation period (April 1, 2014 – September 30, 2015), 2,91,744 trades comprising 81.41% of all stock options trades on BSE were identified as reversal trades.
  • A total of 14,720 entities were found to have executed non-genuine trades; Sanjay Kumar was one of them.
  • Reversal trades involved entities reversing buy/sell positions with the same counterparty, lacking genuine trading rationale.
  • The trades allegedly portrayed a false or misleading appearance of trading activity.
  • A Show Cause Notice was issued to the Noticee on March 02, 2022.
  • The adjudicating officer was appointed on April 04, 2025 following transfer of the case.

Regulatory Changes

No new regulatory changes introduced. This is an enforcement action under existing provisions.

Compliance Requirements

  • Alleged violations: Regulations 3(a), (b), (c), (d), 4(1), and 4(2)(a) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 (PFUTP Regulations).
  • Penalty imposed under Section 15HA of the SEBI Act, 1992.
  • Market participants must avoid non-genuine, reversal, or wash trades that create artificial volumes or misleading appearances of trading activity.

Important Dates

  • Investigation Period: April 1, 2014 – September 30, 2015
  • Show Cause Notice issued: March 02, 2022
  • New Adjudicating Officer appointed: April 04, 2025
  • Order Number: Order/JS/DP/2025-26/32228

Impact Assessment

This order is part of SEBI’s ongoing enforcement sweep against entities involved in the BSE Illiquid Stock Options manipulation case, one of the largest market manipulation investigations in Indian capital markets history. The direct market impact is minimal given the historical nature of the trades, but the order reinforces SEBI’s continued pursuit of all 14,720 identified entities. It serves as a deterrent against manipulative trading practices such as reversal trades and artificial volume creation in derivatives segments.

Impact Justification

Enforcement action against an individual trader for historical manipulation in BSE illiquid stock options segment (2014-15); significant from regulatory precedent standpoint but limited direct market impact today.