Description

SEBI adjudication order imposing penalty on S K Garments Private Limited for executing 7 non-genuine reversal trades in illiquid stock options on BSE during April 2014 to September 2015, creating artificial trading volume of 9,32,000 units.

Summary

SEBI issued Adjudication Order No. Order/AK/RK/2026-27/32340 against S K Garments Private Limited (PAN: AALCS3830L) for executing non-genuine reversal trades in illiquid stock options on BSE. The company was found to have participated in a large-scale scheme involving 2,91,744 allegedly non-genuine trades (81.40% of all BSE stock options trades) during April 1, 2014 to September 30, 2015, which artificially inflated trading volumes.

Key Points

  • S K Garments Private Limited executed 7 non-genuine trades in 3 Stock Options contracts, creating artificial volume of 9,32,000 units
  • The trades were part of a broader SEBI investigation into illiquid stock options on BSE covering the investigation period (IP) of April 1, 2014 to September 30, 2015
  • Total market-wide impact: 2,91,744 allegedly non-genuine trades comprising 81.40% of all BSE stock options trades during the IP
  • Violations alleged under PFUTP Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a)
  • Show Cause Notice (SCN) bearing reference EAD-8/AS/AK/40343/1/2022 was issued on August 10, 2022
  • Original Adjudicating Officer Smt. Asha Shetty; case subsequently transferred with new AO appointed on April 3, 2025

Regulatory Changes

No new regulatory changes introduced. This is an enforcement order applying existing SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations).

Compliance Requirements

  • Entities must not engage in reversal trades or non-genuine trades that create artificial volumes in any segment of stock exchanges
  • Compliance with PFUTP Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) is mandatory — prohibiting fraudulent, manipulative, and deceptive trading practices
  • Market participants in stock options segments must ensure all trades reflect genuine buy/sell interest

Important Dates

  • Investigation Period (IP): April 1, 2014 – September 30, 2015
  • Show Cause Notice issued: August 10, 2022
  • Transfer of AO and new appointment: April 3, 2025
  • Adjudication Order issued: April 2026 (Order No. Order/AK/RK/2026-27/32340)

Impact Assessment

This order has low direct market impact given the historical nature of the violations (2014–2015). However, it signals continued SEBI enforcement action against participants in the illiquid stock options manipulation scheme on BSE. The order reinforces SEBI’s stance that artificial volume creation through reversal trades is a serious violation subject to penalty under Section 15HA of the SEBI Act. The broader investigation identified 81.40% of BSE stock options trades as non-genuine during the period, highlighting systemic manipulation that SEBI continues to adjudicate years later.

Impact Justification

Historical enforcement action against a private limited company for trades from 2014-2015; part of a broader SEBI investigation into illiquid stock options manipulation on BSE. Limited current market impact as the investigation period has long passed, but relevant as precedent for PFUTP enforcement.