SEBI Imposes ₹5 Lakh Penalty, Ruling Out 'Artificial Volume' Manipulations in Stock Options

SEBI Imposes ₹5 Lakh Penalty, Ruling Out 'Artificial Volume' Manipulations in Stock Options​

The Securities and Exchange Board of India (SEBI) has adjudicated against an individual for alleged manipulative trading practices in the illiquid stock options segment at the Bombay Stock Exchange (BSE). The Adjudicating Officer concluded that the trading activities amounted to non-genuine trades, resulting in the creation of artificial market volume.

SEBI ultimately imposed a penalty of ₹ 5,00,000/- on Sweta Agarwal for violating key provisions of the Prevention of Fraudulent and Unfair Trade Practices (PFUTP) Regulations, 2003.

Understanding the Alleged Manipulative Activity​

The inquiry focused on trading conducted by Ms. Agarwal in the stock options segment of BSE during the period of April 1, 2014, to September 30, 2015. SEBI had observed a large-scale reversal of trades, which the regulator found detrimental to market transparency.

Specifically, the allegations centered on Ms. Agarwal executing reversal trades. These trades were deemed non-genuine because they lacked a basic commercial rationale and were executed on a short time frame with a single counterparty. The actions generated an artificial volume of 600,000 units in one contract.

Regulatory Breach: PFUTP Violations Established​

SEBI’s investigation concluded that the said alleged non-genuine trades were manipulative and deceptive. Consequently, the Adjudicating Officer found Ms. Agarwal guilty of violating several critical regulations.

The specific provisions cited for violation were Regulations 3(a), (b), (c), (d) and Regulation 4(1) and 4(2)(a) of the PFUTP Regulations, 2003. These regulations prohibit any person from dealing in securities in a fraudulent or unfair manner.

SEBI’s Rationale for Imposing Penalty​

In the adjudication proceedings, Ms. Agarwal contended that the Show Cause Notice (SCN) was issued with inordinate delay and that her trades were negotiated deals, not fraudulent. She also sought to implead BSE and the trading member in the proceedings.

The Adjudicating Officer rejected these defenses, asserting that the trades were inherently suspicious due to the sudden reversal of positions with the same counterparty. The expert noted that the short span of time between the buy and sell trades, coupled with significant price differences, indicated a pre-determined price or a meeting of minds.

The SEBI ruling reiterated that the obligation to ensure the genuineness of trades rests squarely on the individual trader. The regulator emphasized that the exchange merely provides the platform, but the trader must adhere to market integrity standards.

Penalty Determination and Order​

Upon finding that the trades were non-genuine and artificially generated volume, SEBI confirmed the violation of PFUTP Regulations. The final order, dated April 23, 2026, formally imposed the penalty.

The penalty amount for Sweta Agarwal (PAN:BKEPA0806R) was determined to be ₹ 5,00,000/- (Rupees Five Lakhs only). SEBI stated that this penalty was commensurate with the lapse and omission observed on the part of the Noticee.

Ms. Agarwal has 45 days from the receipt of the order to remit the penalty amount through SEBI’s designated online payment facility. Failure to comply may result in consequential recovery proceedings under the SEBI Act, 1992.