sebi:Order/SM/KH/2023-24/27861

SEBI · SEBI · 2021-06-21 · Soma Majumder, Adjudicating Officer

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Facts / Headnote

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

Provisions invoked

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

Regulations

• Reg. 3
• Reg. 2(1)(c)
• Reg. 4(1)
• Reg. 2(1)
• Reg. 4(2)
• Reg. 3(a)
• Reg. 26
• Reg. 2(1)(c)(8)

Parties

• Umesh Jayantilal Desai

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 in illiquid stock options at BSE, and is liable for monetary penalty of Rs.5,00,000 under Section 15HA of the SEBI Act.

Full text

Adjudication Order in respect of Umesh Jayantilal Desai in the matter of Illiquid Stock Options at BSE. Page 2 of 16 3. Umesh Jayantilal Desai (“the Noticee”) was one such client whose reversal trades involved squaring off transactions with significant difference in the sell value and buy value of the transactions. The aforesaid reversal trades allegedly resulted into generation of artificial volumes, leading to allegations that the Noticee had violated Regulation 3(a), (b), (c), (d) and Regulation 4(1), 4(2)(a) SEBI (Prohibition of Fraudulent and Unfair Trading Practices related to Securities Markets) Regulations, 2003 (hereinafter, referred to as “PFUTP Regulations, 2003/ PFUTP Regulations”).

Adjudication Order in respect of Umesh Jayantilal Desai in the matter of Illiquid Stock Options at BSE. Page 3 of 16 6. In the aforesaid SCN, it was alleged that Noticee, by indulging in execution of aforesaid non-genuine reversal trades, had violated Regulation 3(a),(b),(c),(d), 4(1), 4(2)(a) of PFUTP Regulations, 2003 which are reproduced as follows: “3. Prohibition of certain dealings in securities No person shall directly or indirectly— (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under.

Adjudication Order in respect of Umesh Jayantilal Desai in the matter of Illiquid Stock Options at BSE. Page 4 of 16 “SEBI has framed the SEBI Settlement Scheme, 2022 pursuant to the Order dated May 13, 2022 passed by the Hon’ble Securities Appellate Tribunal (Annexure 5), wherein the following directions were issued to SEBI: “17. We are, thus, of the opinion that SEBI should reconsider and seriously give a thought in coming out with a fresh scheme under Clause 26 of the Settlement Regulations, 2018. Such scheme can be a onetime scheme for this class of person. The terms of settlement should be attractive so that it could attract the noticees / entities to come forward and settle the matter which will ameliorate the harassment of penalty proceedings to the noticees and at the same time would help to clear the backlog of these pending matters before various AOs.” (Emphasis Supplied)

Source: SecMarx — sebi:Order/SM/KH/2023-24/27861. 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.