sebi:Order/PB/AS/2021-22/15231

SEBI · SEBI · 2021-09-30 · Parag Basu, Adjudicating Officer

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Penalty of Rs. 5,00,000 imposed under section 15HA of SEBI Act, 1992 for violation of PFUTP Regulations, 2003

Provisions invoked

• s. 15
• s. 19
• s. 15H
• s. 15J
• s. 15F
• s. 28A

Regulations

• Reg. 3
• Reg. 3(a)

Parties

• Nishil Surendrabhai Marfatia

Holding

The Noticee violated regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of PFUTP Regulations, 2003 by executing non-genuine reversal trades creating artificial volume, and is liable to monetary penalty of Rs. 5,00,000 under section 15HA of SEBI Act, 1992.

Full text

Page 2 of 22 stock options and therefore were alleged to be manipulative and deceptive in nature. In view of the same, SEBI initiated adjudication proceedings against the Noticee for violation of the provisions of regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations, 2003”).

Page 3 of 22 S. No. Contract Name Avg. Buy Rate (₹) Total Buy Volume (No. of units) Avg. Sell Rate (₹) Total Sell Volume (No. of units) % of Non Genuine trades of Noticee in the contract to Noticee's Total trades in the Contract % of Non Genuine trades of Noticee in the contract to Total trades in the Contract % of Artificial Volume generated by Noticee in the contract to Noticee's Total Volume in the Contract % of Artificial Volume generated by Noticee in the contract to Total Volume in the Contract 1 IFCI15JUL28.00CEW1 0.05 568000 0.9 568000 62.5 27.78 50 25.91 2 JAIA15JUL12.00CEW1 0.05 456000 1.15 456000 36.36 26.67 41.3 34.55 3 SOIB15JUL22.00PEW1 0.05 558000 0.9 558000 100 26.67 100 45.26 4 SOIB15JUL26.00CEW1 0.05 351000 1.45 351000 100 23.53 100 27.96 5 UNIT15JUL10.00CEW1 0.05 1430000 0.35 1430000 100 100 100 100 6 UNIT15MAR12.00PE 0.35 801000 0.05 801000 100 100 100 100

Page 4 of 22 dated December 21, 2021, Noticee submitted reply to the SCN, which has been summarized below:  Noticee’s trades were genuine as executed on the platform of BSE.  Noticee’s transactions were subjected to various charges and taxes including Exchange Turnover Tax, Service Tax, STT etc.  All the transactions had been recorded in the regular books of accounts, records and Income Tax Returns.  SCN was issued after an inordinate delay of 6 to 7 years, therefore, SCN must be set aside on this ground alone.  The trades were genuine as they were executed on the anonymous platform of exchange, without any knowledge of the counterparty, at price ranges which were permitted by BSE and SEBI. Also, obligations arising out of it were settled through clearing mechanism of BSE.  Noticee’s trades were very infrequent and took place only on few days during the IP. Also, the volume generated via allegedly non-genuine trades comprises only 0.12% of total volume of the Noticee across all exchanges and segments during the IP, which is negligibly small. If the intention of Noticee was to generate artificial volume and create misleading appearance of trading, the frequency of trades and the volume generated would have been higher.  Noticee executed few trades in the F&O segment, and understood that said segment is risky, and had not traded in the said segment thereafter.  SCN does not highlight any possible reason/ purpose for executing the allegedly manipulative trades.  Noticee

Source: SecMarx — sebi:Order/PB/AS/2021-22/15231. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.