SEBI completes recovery in illiquid stock options manipulation case

The Enforcement Action

The Securities and Exchange Board of India (SEBI) has recorded the completion of Recovery Certificate No. RC9147 of 2026, closing recovery proceedings against two individuals, Amar Nath Das (PAN AMNPD2486Q) and Rajesh Kumar Agarwal (PAN AFFPA4486E), in what the regulator files as "the matter of Illiquid Stock Options". The completion notice was published in SEBI's recovery-proceedings section on 5 August 2026.

A recovery certificate is the instrument SEBI uses to collect amounts that fall due under its orders, from monetary penalties to disgorgement. Its completion means the sum owed in this instance has been realised and the recovery file for these two parties can be closed. SEBI's completion notice is a procedural record; it does not restate the underlying penalty figure, and this report does not attribute a specific recovered sum to the two named individuals.

The closure is a small terminal step in one of the largest enforcement exercises SEBI has run. The illiquid stock options label covers a market-wide investigation into non-genuine trades on the BSE's equity stock options segment, a matter in which the regulator has passed orders against thousands of entities and which the Securities Appellate Tribunal (SAT) continues to hear on appeal. The two individuals named in RC9147 of 2026 are among those from whom SEBI has now recovered dues arising out of that matter.

Neither individual has publicly responded to the completion of the recovery certificate, and neither is on record contesting it. Entities penalised in the wider matter have taken their cases to the SAT; those appeals are considered below.

How the Scheme Worked

The mechanism at the centre of the illiquid stock options matter is described in detail in SEBI's adjudication orders and in the SAT rulings that have tested them. According to those orders, SEBI examined trading in the stock options segment of the BSE for the period 1 April 2014 to 30 September 2015 and found that a very large share of activity there was not genuine.

SEBI's investigation found that reversal trades made up about 81.40% of all trades in the segment during the period, a share the SAT reproduced from the regulator's analysis of 2,91,744 trades. The instruments were illiquid precisely because they had little or no real market interest, which is what made them useful for generating artificial activity.

The pattern the orders describe is a reversal trade. As the SAT put it in one ruling in the matter, the conduct involved "pre-mediated buying and selling of stocks between the same set of counterparties during a day which creates artificial trade". In a representative example set out by the tribunal, a party entered a sell trade for 1,60,000 units at Rs 2.20 per unit and then, within about 35 minutes, bought the same quantity from the same counter-party at Rs 0.15 per unit. The two legs cancelled out in economic terms but generated large recorded volume and moved money between the counterparties without any real change in market position.

SEBI's orders characterise these as non-genuine trades executed on the strength of a "prior meeting of minds to execute reversal trades at pre-determined price". Because the price gap between the two legs was fixed in advance, one side booked an artificial profit and the other an artificial loss, useful, the regulator has noted, for those seeking to manufacture gains or losses on paper. The volume they created was, in SEBI's finding, fictitious, distorting the picture the market presented to ordinary participants.

The scale of the exercise is what sets it apart. The SAT has recorded that SEBI proceeded against 14,720 entities for trades in the illiquid stock options segment. Of these, 10,980 availed themselves of a settlement scheme SEBI offered, while about 1,000 cases remained pending at the tribunal stage. The recovery certificate now completed is one thread in that vast body of proceedings, following the ordinary sequence of a SEBI order, a demand, a recovery certificate and, finally, recovery.

The Law Invoked

The violations SEBI found in the matter sit under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, known as the PFUTP Regulations. Orders in the matter cite Regulations 3(a), (b), (c) and (d), which prohibit dealing in securities through fraudulent or deceptive devices, and Regulation 4(1) together with Regulation 4(2)(a), which bar manipulative and deceptive trading, including trades that create a false or misleading appearance of trading.

The penalty for such conduct is imposed under Section 15HA of the SEBI Act, 1992. As the SAT has noted, that section provides for a penalty of "not less than five lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of such practices, whichever is higher". Adjudication itself proceeds under Section 15-I, which empowers SEBI's adjudicating officers to hold inquiries and impose penalties, while Section 15J lists the factors, such as the amount of gain and whether the conduct was repetitive, that an officer must weigh.

Appeals from these orders lie under Section 15T of the SEBI Act to the SAT. These are the provisions the orders and tribunal rulings in the matter themselves cite; the completion notice for the recovery certificate is an administrative closure and adds no fresh legal findings.

What Happens Next

For the two individuals named in RC9147 of 2026, the completion of the recovery certificate marks the end of the collection process on the dues arising from their matter. Recovery is the last stage: a SEBI order creates the liability, a certificate is issued to enforce it, and completion closes that particular file.

For the wider matter, proceedings continue. SEBI's orders are appealable to the SAT, and, from the tribunal, on questions of law to the Supreme Court. The tribunal has upheld penalties in a series of these cases, dismissing appeals where it found the reversal-trade pattern established, while the roughly 1,000 pending cases work their way through. Entities that took the settlement route resolved their matters without the kind of adverse finding that a full order records.

Because this is a SEBI adjudication matter rather than a criminal prosecution, the findings are civil regulatory findings made by the regulator and tested on appeal at the SAT, not verdicts of a criminal court. They remain subject to the appeal rights described above.

What It Means

For ordinary investors, the illiquid stock options matter is a case study in why reported volume alone is a poor guide to a security's health. Volume can be manufactured, and in this segment, SEBI found, most of it was. The practical lesson is to treat thin, rarely traded contracts with particular caution and to be wary of instruments whose recorded activity is not matched by genuine, two-way market interest.

There is also a verification takeaway. Investors can check whether the intermediaries they deal with are registered by using SEBI's public registers on sebi.gov.in, and can read the regulator's enforcement and recovery notices in the same place. Where a scheme or an adviser promises manufactured gains or guaranteed paper losses for tax purposes, that is a signal to step back: engineering artificial profits and losses through pre-arranged trades is exactly the conduct SEBI has pursued here.

Finally, the completion of a recovery certificate is a reminder that SEBI's orders carry enforceable financial consequences that follow the individual until the money is collected. A penalty is not merely a headline; it is a demand the regulator can and does recover.

FAQ

What exactly did SEBI record in this action?

SEBI published the completion of Recovery Certificate No. RC9147 of 2026 on 5 August 2026, closing recovery proceedings against Amar Nath Das and Rajesh Kumar Agarwal in the illiquid stock options matter. The notice records that the dues owed under the certificate have been recovered and the file closed.

Is this a criminal case or a regulatory one?

It is a regulatory matter. This is a SEBI adjudication proceeding under securities law, not a criminal prosecution. SEBI's findings are civil regulatory findings, made by the regulator and appealable to the Securities Appellate Tribunal. A recovery certificate enforces a penalty already imposed under a SEBI order; it is not a criminal conviction, and the appeal route remains available to anyone contesting the underlying order.

What were reversal trades in illiquid stock options?

According to SEBI's orders and SAT rulings, entities executed pairs of trades in barely-traded options on the BSE, buying and selling the same contract with the same counter-party at pre-arranged, sharply different prices within minutes. This created large but fictitious volume and moved money between the parties without genuine market risk, which SEBI held to be non-genuine and manipulative.

Can these SEBI orders be appealed?

Yes. Orders passed by SEBI's adjudicating officers can be appealed to the Securities Appellate Tribunal under Section 15T of the SEBI Act, and from there, on a question of law, to the Supreme Court. In the illiquid stock options matter, the SAT has heard and decided many such appeals, upholding penalties in a series of cases.

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

SEBI maintains public registers of registered intermediaries such as brokers, investment advisers and research analysts on its website, sebi.gov.in. You can search by name or registration number to confirm that whoever is handling your money is authorised, and you can read enforcement orders and recovery notices in the same place.

Where can I read the official record?

The completion notice sits in the recovery-proceedings section of sebi.gov.in. The mechanism of the wider matter, and the statutory provisions involved, are set out in SEBI's adjudication orders and in SAT rulings such as those published on indiankanoon.org.

This report is based on the official SEBI completion notice for Recovery Certificate No. RC9147 of 2026, published 5 August 2026, read alongside Securities Appellate Tribunal rulings in the illiquid stock options matter published on indiankanoon.org.