sebi:Order/SBM/AK/2022-23/16840

SEBI · SEBI · 2021-07-27 · SURESH B MENON, ADJUDICATING OFFICER

Reviewed by Varun Matlani, Advocate — Securities Lawyer practicing in SAT and SEBI

Facts / Headnote

Violation established; penalty of Rs.5,00,000 imposed under Section 15HA of SEBI Act

Provisions invoked

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

Regulations relied on

• SEBI (PFUTP) Regulations, 2003 — 3(a)
• SEBI (PFUTP) Regulations, 2003 — 4(1)
• SEBI (PFUTP) Regulations, 2003 — 4(2)(a)

Parties

• Amish Chinubhai Shah

Holding

The Noticee violated regulations 3(a), 4(1) and 4(2)(a) of the PFUTP Regulations, 2003 by executing 64 non-genuine reversal trades in 14 illiquid stock option contracts at BSE creating artificial volume, and is liable to a penalty of Rs.5,00,000 under section 15HA of the SEBI Act.

Full text

___________________________________________________________________________ Adjudication order in respect of Amish Chinubhai Shah in the matter of dealing in Illiquid Stock Options at BSE Page 2 of 12 and buy value of the transactions. It was therefore alleged that Noticee had executed the reversal trades, which were non-genuine in nature and have created false or misleading appearance of trading in terms of creation of artificial volume in the Stock Options segment at BSE and therefore, it is alleged that the Noticee has violated the provisions of regulations 3(a), (b), (c), (d) and regulation 4(1), 4(2) (a) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’). In view of the above reasons, adjudication proceedings have been initiated against the Noticee under the provisions of section 15 HA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’). APPOINTMENT OF ADJUDICATING OFFICER

___________________________________________________________________________ Adjudication order in respect of Amish Chinubhai Shah in the matter of dealing in Illiquid Stock Options at BSE Page 3 of 12 c. It is observed from the table above that the trades entered by the Noticee in the contract of “GMRI15MAR10.00CEW1” on February 27, 2015 with his counterparty viz. Jitendra Rameshbhai Patel were reversed between the Noticee and the same counterparty on the same day resulting in reversal of trades which are, prima facie, considered to be as non-genuine. Therefore, in the process artificial volume in the stock option contract at BSE has been generated by the Noticee through such non-genuine trades. From the table above, it is observed that the artificial volume created as no. of units reversed in non-genuine trades is 18,000 shares comprising both volume of initial trade and volume of reversal trade, while not considering the volume which is not reversed. In the process, it is observed that the Noticee had made a profit of Rs. 21,600. d. It is further observed from the trade data of the Noticee that he has allegedly entered into non-genuine trades in 14 contracts wherein he executed a total of 64 trades all of which were, prima facie, non-genuine trades. In view of this, it is alleged that such fraudulent trades of the Noticee had resulted into creation of artificial volume of total 9,58,000 units. e. In this regard, details of all the alleged non-genuine trades of the Noticee i

___________________________________________________________________________ Adjudication order in respect of Amish Chinubhai Shah in the matter of dealing in Illiquid Stock Options at BSE Page 4 of 12 a. The trades were carried out in normal course of Business, through transparent and screen based trading platform of BSE. The trades are not fraudulent/fictitious. The SCN was issued after more than 6 months. No intent to hike the price movement, as trades were purely based on commercial terms. b. The Noticee was not aware that trades were manipulative. All trades were in well-known liquid companies with strong management and good promoter backing. No warning was received from SEBI or BSE to exercise caution while dealing in these shares. c. The Noticee traded in some portion of the total volume, many investors who are not connected also traded and it indicates a broad based trading. Other investors have voluntarily participated without any influence. No investor was put to a loss. d. Online trade was done through algorithmic trading software approved by the exchanges. The instances of reversal of the trades are purely incidental to the trading strategy and are not planned to be executed. The random nature of timing, quantity, dealers and partial matching with other participants substantiate that these are unintentional and are a matter of pure coincidence. The human involvement is very less, all the trades are jobbing/arbitrage in nature due to high speed trading in small lots

Source: SecMarx — sebi:Order/SBM/AK/2022-23/16840. 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.