Mumbai: The Securities Appellate Tribunal (SAT) on Wednesday quashed market regulator Sebi’s order imposing a fine of ₹7 lakh on Jio Financial Services for alleged manipulation of trades done in long-dated Nifty options in 2017. Jio Financial Services was formerly known as Reliance Strategic Investments.
Sebi had alleged that Reliance Strategic Investments, along with Morgan Stanley France (MSF), had knowingly traded in the puts of strike price 11,400 PE at a discount of 15%, 35% and 37% to the intrinsic value of the put options on July 31, August 8, and August 10, 2017, respectively.
The investigation period was from July 31, 2017, till contract expiry day, i.e., December 28, 2017.
The regulator had alleged that the trade was done on mutual arrangement. This amounted to active concealment of the fair price of the option and resulted in manipulation of the price of the contract, which had the effect of potentially misleading investors with regard to the likely future price of the underlying. It had, thereby, violated Sebi’s PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, the regulator had said.
SAT said “the finding that the trades which are executed away from the theoretical value as manipulative is erroneous and without any basis”.
“A trade cannot be manipulative simply because it is away from the fair value,” SAT’s presiding officer Justice Tarun Agarwala and member Meera Swarup said in their order. “In our opinion, the fair value is only an indicator and not a measure to hold a trade as manipulative just because it is away from the fair value…,” they said.
