SEBI Slaps Rs20 Lakh Penalty on 4 for Trading in Illiquid Stock Options
Moneylife Digital Team 19 March 2025
Market regulator Securities and Exchange Board of India (SEBI) has imposed penalties of Rs20 lakh on four entities for engaging in non-genuine trading activities within the illiquid stock options segment of the BSE. Each implicated entity has been fined Rs5 lakh for participating in these fraudulent activities.
 
The entities penalised include Nirman Chatha, Rajvardhan Fundation, Dinesh Kumar Agarwal Hindu undivided family (HUF) and Pramod Kumar Jain (notices).
 
In four separate orders, Asha Shetty, adjudicating officer (AO) of SEBI, articulated that the trading behaviour of these four entities confirmed that such trades were not normal, indicating that the trades executed by the noticees were not genuine and being non-genuine, created an appearance of artificial trading volumes in respective contracts in violation of Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations, 2003.
 
SEBI investigated these trading activities, which spanned between April 2014 to September 2015. It discovered that a staggering 291,643 trades, accounting for about 81.38% of all trades executed in the stock options segment, were potentially non-genuine. This alarming statistic underscores how these activities distorted the market by creating artificial volumes.
 
SEBI also mentioned that such trades were alleged to be non-genuine and created a false or misleading appearance of trading in terms of artificial volumes in stock options; therefore, they were alleged to be manipulative and deceptive.
 
The implicated entities executed trades characterised by reversal trades, which typically involve buying and selling the same securities almost simultaneously to create an illusion of heightened trading activity, the market regulator says, adding, "Such practices not only mislead other market participants but also undermine the fairness and transparency of the trading environment."
 
Specifically, SEBI says individuals involved executed varying numbers of trades, with Rajvardhan Fundation, Dinesh Kumar Agarwal HUF and Pramod Kumar Jain executing two trades each, while Nirman Chatha carried out three trades.
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