Description

SEBI adjudication order against Rajeev Chandak HUF 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 against Rajeev Chandak HUF (PAN: AAMHR6180G) for participating in 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 allegedly created artificial volumes and a false or misleading appearance of trading activity, in violation of SEBI’s PFUTP Regulations.

Key Points

  • SEBI investigated large-scale reversal trades in BSE’s Illiquid Stock Options segment for the period April 1, 2014 to September 30, 2015.
  • A total of 2,91,744 trades, comprising 81.41% of all stock options trades on BSE during the period, were identified as reversal trades involving the same counterparties.
  • 14,720 entities were found to have executed such non-genuine trades; Rajeev Chandak HUF was one of them.
  • The trades lacked basic trading rationale and allegedly created artificial volume in the contracts.
  • SEBI initiated adjudication proceedings for alleged violation of Regulations 3(a), (b), (c), (d), 4(1), and 4(2)(a) of the PFUTP Regulations, 2003.
  • A Show Cause Notice was issued on August 30, 2021.
  • The current Adjudicating Officer was appointed on April 4, 2025 following transfer of the case.

Regulatory Changes

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

  • Section 15-I and Section 15HA of the SEBI Act, 1992
  • Rule 5 of SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995
  • Regulations 3(a), (b), (c), (d), 4(1), and 4(2)(a) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003

Compliance Requirements

  • The Noticee (Rajeev Chandak HUF) is subject to penalty as determined by the Adjudicating Officer under Section 15HA of the SEBI Act for the alleged manipulative and deceptive trading conduct.
  • Market participants are reminded that reversal trades designed to create artificial volumes constitute violations of PFUTP Regulations and may attract enforcement action.

Important Dates

  • April 1, 2014 – September 30, 2015: Investigation period for illiquid stock options trading on BSE.
  • August 30, 2021: Show Cause Notice issued to Rajeev Chandak HUF.
  • April 4, 2025: Current Adjudicating Officer appointed following case transfer.
  • Order No.: Order/JS/RJ/2025-26/32302

Impact Assessment

This order is part of SEBI’s broader crackdown on manipulation in illiquid stock options on BSE, involving thousands of entities. The direct market impact is minimal given the historical nature of the violations and the specific individual/HUF scope. However, it signals SEBI’s continued pursuit of enforcement actions related to the 2014–2015 ISO manipulation investigation. Investors and trading entities involved in similar structured reversal trades should be aware of ongoing and potential future enforcement actions.

Impact Justification

Enforcement action against a single HUF entity for historical manipulation in illiquid stock options; part of a large SEBI investigation covering 14,720 entities but with limited forward-looking market impact.