SEBI attaches Rajvardhan Foundation assets in illiquid options case

The Enforcement Action

The Securities and Exchange Board of India (SEBI) has moved to recover an unpaid penalty from Rajvardhan Foundation, issuing a Notice of Attachment dated August 05, 2026 under Recovery Certificate No. 8960 of 2025 in the matter of dealing in illiquid stock options at the Bombay Stock Exchange (BSE). The notice, published on SEBI's recovery-proceedings page, is an enforcement step: it follows a monetary demand raised by an earlier SEBI order that, per the certificate, remains unpaid.

A recovery certificate is drawn up when a penalty imposed through a SEBI adjudication order is not settled within the time allowed. Once a certificate exists, SEBI's recovery officer is empowered to attach the defaulter's bank accounts, demat holdings and other property to realise the sum due. The attachment notice against Rajvardhan Foundation is that recovery machinery in motion, rather than a fresh finding on the merits.

The underlying matter is one of the larger surveillance actions SEBI has pursued in the equity derivatives space. It concerns reversal trades in the stock options segment of BSE that, SEBI found, created artificial volume on the exchange. Rajvardhan Foundation is one of the entities against whom SEBI drew a recovery certificate after an adjudication penalty in that matter went unpaid. The entity has not publicly responded to the recovery action, and the recovery certificate does not, on its public listing, disclose the exact sum being recovered.

How the Scheme Worked

The recovery action traces back to a SEBI investigation into what it called "large scale reversal of trades in stock options" on BSE. According to a SEBI adjudication order in the matter (Order No. Order/AK/RK/2025-26/31783), the regulator investigated trading in illiquid stock options at BSE for the period from April 1, 2014 to September 30, 2015, described in the order as the "Investigation Period".

The order records the scale of the problem in plain figures. SEBI found that a total of 2,91,744 trades, comprising 81.40% of all the trades executed in the stock options segment of BSE during the investigation period, were non-genuine. In SEBI's words, this "large scale reversal of trades in stock options led to creation of artificial volume at BSE".

The mechanism, as SEBI describes it, turned on reversal trades. An entity would take a position in an illiquid, thinly traded option contract and then reverse it, buying and selling with a counterparty at pre-arranged prices that bore little relation to genuine market discovery. Because the contracts were illiquid, a small number of participants could move them freely. The paired trades cancelled out in economic terms but left a footprint of volume on the exchange. SEBI held that such trades "created false or misleading appearance of trading in terms of artificial volumes in stock options" and were, therefore, alleged to be manipulative and deceptive in nature.

The procedural history in these cases follows a set path. SEBI issued show-cause notices to the entities it identified, appointed an adjudicating officer, and passed adjudication orders imposing penalties where the allegations were made out. Where a penalised entity did not pay, SEBI issued a recovery certificate and then, as with Rajvardhan Foundation, a notice of attachment. The August 2026 notice is the recovery stage of that chain, not the adjudication stage.

The Law Invoked

The adjudication orders in this matter are grounded in SEBI's anti-manipulation code. According to the order cited above, SEBI initiated proceedings for violation of Regulations 3(a), (b), (c), (d), 4(1) and 4(2)(a) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, generally referred to as the PFUTP Regulations. Regulation 3 prohibits dealing in securities through fraudulent, manipulative or deceptive devices. Regulation 4 prohibits manipulative and deceptive practices, and Regulation 4(2)(a) specifically covers creating a false or misleading appearance of trading.

Penalties in these matters are imposed under Section 15HA of the SEBI Act, 1992, which prescribes the penalty for indulging in fraudulent and unfair trade practices. The adjudication itself is conducted under Section 15-I of the SEBI Act read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995.

The recovery that follows non-payment is a separate statutory stream. SEBI's power to recover its dues, including by attaching and selling property, is exercised through a recovery officer under Section 28A of the SEBI Act, which imports the recovery machinery ordinarily used for tax dues. The Recovery Certificate No. 8960 of 2025 and the attachment notice against Rajvardhan Foundation sit within this recovery framework.

What Happens Next

For Rajvardhan Foundation, the immediate consequence is that the attached assets cannot be freely dealt with while the recovery certificate is live. A defaulter can bring the process to an end by paying the certified dues, after which the attachment is ordinarily lifted; failing that, attached property can eventually be sold to realise the amount owed.

On the underlying penalty, the route of challenge is the appellate one. A SEBI adjudication order can be appealed to the Securities Appellate Tribunal (SAT) within the prescribed limitation period, with a further appeal to the Supreme Court on a question of law. It is at that forum that an aggrieved entity contests SEBI's findings. The recovery step does not add a fresh finding of wrongdoing; it enforces the demand that the adjudication order created.

It is worth stating plainly that a SEBI adjudication order is a regulatory finding reached after its own proceedings, and it remains appealable. Where an entity has exhausted or not pursued that appeal, and has not paid, recovery follows as a matter of course.

What It Means

For ordinary investors, this action is a reminder that manipulation in thinly traded contracts is neither invisible nor cost-free. Illiquid option contracts, precisely because so little genuine trading happens in them, are attractive vehicles for creating artificial volume, and SEBI's surveillance of the BSE options segment has produced hundreds of orders in this single matter. The recovery drive shows the regulator pursuing penalties years after the trades, right down to attaching assets.

The practical takeaway is verification. Investors can read SEBI's adjudication and recovery orders directly on the regulator's website, where enforcement actions, recovery certificates and attachment notices are published by month. Anyone approached with a scheme that promises easy profit or loss "booking" through options trades should treat unusually illiquid contracts and pre-arranged, reversing trades as a red flag; these are the exact features SEBI has repeatedly found to be manipulative. Checking whether a broker, adviser or scheme is registered with SEBI, and whether the entity or its principals feature in SEBI's orders, is a straightforward first line of defence.

None of this requires panic. The system worked as designed here: surveillance flagged the pattern, adjudication tested it, and recovery is enforcing the outcome.

FAQ

What exactly did SEBI order?

SEBI issued a Notice of Attachment dated August 05, 2026 under Recovery Certificate No. 8960 of 2025 against Rajvardhan Foundation, in the matter of dealing in illiquid stock options at BSE. It is a recovery step to realise an unpaid penalty that an earlier SEBI adjudication order in the matter had imposed.

Does this mean Rajvardhan Foundation is guilty of a crime?

No. A SEBI adjudication order is a civil regulatory finding, not a criminal conviction, and it is appealable to the Securities Appellate Tribunal. The attachment notice enforces an unpaid penalty; it does not itself decide guilt. Any characterisation of the trades as manipulative in this report is SEBI's finding in the matter, subject to due process.

What were the trades SEBI objected to?

Per a SEBI adjudication order in the matter, the regulator found that reversal trades in illiquid stock options on BSE created artificial volume. It observed that 2,91,744 trades, or 81.40% of all trades in the stock options segment during April 2014 to September 2015, were non-genuine and created a false or misleading appearance of trading.

Can the underlying order be appealed?

Yes. A SEBI adjudication order can be challenged before the Securities Appellate Tribunal within the limitation period, with a further appeal to the Supreme Court on a question of law. Once appeals are exhausted or not pursued, and the penalty is unpaid, SEBI can recover the dues through a recovery certificate and attachment.

How can I check if my broker or scheme is registered with SEBI?

SEBI maintains public registers of intermediaries and publishes its orders online. Investors can search the "Intermediaries" and "Enforcement" sections of the SEBI website to verify a registration and to see whether an entity features in any order. Registration and a clean enforcement record are basic checks before parting with money.

Where can I read the official documents?

The attachment notice is on SEBI's recovery-proceedings page, and the adjudication order describing the matter is on SEBI's enforcement pages. Both are linked below. Reading the primary documents is the most reliable way to understand exactly what SEBI found and what it is now recovering.

This report is based on the official SEBI Notice of Attachment dated August 05, 2026 under Recovery Certificate No. 8960 of 2025 and a SEBI adjudication order in the illiquid stock options matter, both published by SEBI.