sebi:Order/SBM/VS/2021-22/14400

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 of the SEBI Act

Provisions invoked

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

Regulations

• Reg. 3
• Reg. 4(1)
• Reg. 3(a)

Parties

• Aadarshini Trading Company Private Limited

Holding

The Adjudicating Officer held that Aadarshini Trading Company 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 stock options and imposed a penalty of Rs.5,00,000 under section 15HA of the SEBI Act.

Full text

_____________________________________________________________________________ Adjudication order in respect of Aadarshini Trading Company Private Limited in the matter of dealing in Illiquid Stock Options at BSE Page 2 of 11 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 Aadarshini Trading Company Private Limited in the matter of dealing in Illiquid Stock Options at BSE Page 3 of 11 c. It is observed from the table above that the trades entered by the Noticee in the contract of “DABU15APR270.00PE” on March 23, 2015, with its counterparty viz. R Narayan Steel Industries 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 1,88,000 shares comprising both volume of initial trade and volume of reversal trade, while not considering the volume which is not reversed. d. It is further observed from the trade data of the Noticee that it has allegedly entered into non-genuine trades in 1 contract wherein it executed a total of 4 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 3,76,000 units. e. In this regard, details of all the alleged non-genuine trades of the Noticee in Stock Option Segment of BSE during relevant period are att

_____________________________________________________________________________ Adjudication order in respect of Aadarshini Trading Company Private Limited in the matter of dealing in Illiquid Stock Options at BSE Page 4 of 11 clearing and settlement system of stock exchange which itself has sophisticated on line-surveillance software an system in place. e. Based on aforesaid submission, it is apparent that it was not involved in any modus operandi or manipulations while dealing in option segment of BSE. f. The Noticee also placed reliance upon decision of the Hon’ble Securities Appellate Tribunal in following orders: i. Jagruti Securities vs. SEBI [2008 SCC Online SAT 184 : 2008SAT 184] ii. S.P.J. Stock Brokers Pvt. Ltd. vs SEBI [2013 SCC Online SAT 67 : 920130 SAT 17] iii. Sanjay Agarwal vs. SEBI [Date of Decision May 18, 2012]

Source: SecMarx — sebi:Order/SBM/VS/2021-22/14400. 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.