sebi:Order/SBM/KL/2021-22/12896

SEBI · SEBI · 2021-04-26 · Suresh B Menon, Adjudicating Officer

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Facts / Headnote

Violation found; penalty of Rs.5,00,000 imposed under Section 15HA

Provisions invoked

• s. 15
• s. 19
• s. 15H
• s. 15J

Regulations

• Reg. 2(c)
• Reg. 3
• Reg. 4(1)
• Reg. 4(2)
• Reg. 200
• Reg. 3(a)

Parties

• AAY JAY Consultants & Investment Private Limited

Holding

The Adjudicating Officer held that AAY JAY Consultants & Investment Private Limited violated Regulations 3(a), 4(1) and 4(2)(a) of the PFUTP Regulations, 2003 by executing non-genuine reversal trades in illiquid BSE stock options and imposed a penalty of Rs.5,00,000 under Section 15HA of the SEBI Act.

Full text

Adjudication Order in the matter of Dealings in Illiquid Stock Options at BSE Page 2 of 23 Options segment of BSE during the investigation period. In view of the large scale reversal of trades that were observed in the illiquid Stock Options segment at BSE, it is alleged that these trades were non-genuine in nature.

Adjudication Order in the matter of Dealings in Illiquid Stock Options at BSE Page 3 of 23 Adjudication Rules requiring the Noticee to show cause as to why an inquiry should not be held against it and why penalty, if any, should not be imposed on the Noticee under the provisions of section 15HA of the SEBI Act. The SCN issued to the Noticee, inter alia, mentioned the following-: i. It is noted that Noticee was one of the various entities which were indulged in execution of such alleged non-genuine trades in Stock Options Segment of BSE during the Investigation period. Following points deal with the dealings of Noticee during the Investigation period and allegations against it for execution of non-genuine trades. ii. For the purpose of illustration of non-genuine trades and creation of artificial volume by the Noticee, details of trading done by the Noticee in the contract viz. “NMDC15MAR150.00CEW3” on March 18, 2015 is given below: Date Buyer Seller Buy Order Time Sell Order Time Trade Time Trade Rate (Rs.) Trade Quantity 18/03/2015 AAYJAY CONSULTANTS & INVESTMENT PVT LTD KARTICK CHANDRA KUNDU 15:01:10.910892 14:57:03.514326 15:01:10.910892 0.5 2000 18/03/2015 AAYJAY CONSULTANTS & INVESTMENT PVT LTD KARTICK CHANDRA KUNDU 15:01:10.910892 14:57:26.670055 15:01:10.910892 1 60000 18/03/2015 KARTICK CHANDRA KUNDU AAYJAY CONSULTANTS & INVESTMENT PVT LTD 15:10:55.580615 15:06:01.232720 15:10:55.580615 0.05 66000 18/03/2015 AAYJAY CONSULTANTS & INVESTMENT PVT LTD KARTICK CHANDRA KUND

Adjudication Order in the matter of Dealings in Illiquid Stock Options at BSE Page 4 of 23 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 4,92,000 units. v. In this regard, details of all the alleged non-genuine trades of the Noticee in Stock Option Segment of BSE during relevant period are attached as Annexure B. From the perusal of the trade data of the alleged non-genuine trades of the Noticee, it is observed that Noticee has allegedly executed non-genuine trades in 2 contracts. The total volume of 4,92,000 units generated by the Noticee in these 2 contracts due to its alleged non-genuine trades was artificial volume generated by the Noticee in the stock option segment of BSE. These alleged non-genuine trades, executed by Noticee in above contracts, had significant differential in buy rates and sell rates considering that the trades were reversed on same day. vi. In view of the foregoing, it is alleged that the Noticee, by indulging in execution of reversal trades in Stock Options with same entities on the same day, which were non-genuine in nature, has created false or misleading appearance of trading in the aforementioned contracts traded in the option segment of BSE. In view of the fact that these options contracts were illiquid in nature, having very small volume in trading, the Noticee allegedly created artificial volumes in stock options which was manipulati

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