The Securities and Exchange Board of India (SEBI) has dropped adjudication proceedings against investor Puja Rungta in a case concerning alleged non-genuine trades in illiquid stock options on the Bombay Stock Exchange.
The proceedings related to four alleged reversal trades executed in two stock-option contracts. According to the show-cause notice, these transactions generated an artificial volume of 13,92,000 units and created a false or misleading appearance of trading.
However, Puja Rungta denied executing or authorising the trades. She maintained that the transactions were entered into the exchange system by her broker, Guiness Securities Limited, without her knowledge or consent.
In its order dated 4 September 2026, SEBI noted that Guiness Securities had been declared a defaulter and expelled from BSE in 2019. As the broker was no longer operational and did not respond to requests, essential records such as contract notes, payout details and broker statements were unavailable.
The Adjudicating Officer therefore concluded that there was insufficient primary evidence to establish that Puja Rungta had executed the disputed transactions and dropped the proceedings.
Background of the Illiquid Stock Options Investigation
SEBI began investigating trading activity in the illiquid stock-options segment of BSE after observing a large number of reversal transactions between 1 April 2014 and 30 September 2015.
The regulator found that 2,91,744 trades, representing approximately 81.40% of all trades executed in the relevant segment during that period, were allegedly non-genuine.
According to SEBI, such trades created artificial volume and gave a false or misleading appearance of activity in otherwise illiquid contracts. Several entities were subsequently investigated for possible violations of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.
Puja Rungta was identified as one of the investors whose account was allegedly used to execute reversal trades. SEBI initiated adjudication proceedings and issued a show-cause notice on 4 August 2022.
The notice alleged violations of Regulations 3(a), 3(b), 3(c), 3(d), 4(1) and 4(2)(a) of the PFUTP Regulations.
Four Trades and 13.92 Lakh Units of Artificial Volume
The show-cause notice alleged that four reversal trades were executed through Puja Rungta’s account in two illiquid stock-option contracts.
These transactions allegedly generated an artificial trading volume of 13,92,000 units. SEBI claimed that the trades were executed with the same entities on the same day and were non-genuine, manipulative and deceptive.
Reversal trading generally occurs when an entity buys or sells a contract and reverses the position with the same counterparty. Such transactions can attract regulatory attention when they occur within a short period, involve matching quantities and display significant price differences without a clear economic rationale.
However, the central question in this case was different. Before determining whether the trading pattern was manipulative, SEBI first had to establish whether Puja Rungta had actually executed, authorised or knowingly participated in those trades.
Investor Denied Authorising the Transactions
Puja Rungta consistently denied executing the disputed trades. Through her authorised representative, she argued that the transactions had been recorded through Guiness Securities without her instruction, knowledge or consent.
She submitted her bank statement for the period from 1 March to 30 April 2015. According to her submissions, the statement did not contain any pay-in or payout corresponding to the alleged transactions.
The investor stated that her financial relationship with the broker was limited to a debit of ₹842 and another debit of ₹10,000. She argued that these small transactions were inconsistent with alleged trades she estimated to be worth approximately ₹8 crore to ₹9 crore.
She also submitted her income-tax return for Assessment Year 2015-16. The return reportedly disclosed gross total income of ₹5,60,011 and total income of ₹5,21,400. No profit arising from the alleged reversal trades was reflected in the return.
Based on these records, she argued that she had neither executed the transactions nor received any financial benefit from them.
Complaint Against the Broker
After receiving the show-cause notice, Puja Rungta filed a complaint through SEBI’s SCORES platform against Guiness Securities, alleging unauthorised trading in her account.
She also attempted to contact the broker through emails and registered post to obtain transaction records and explanations. These efforts were unsuccessful because the broker was no longer operational.
BSE had declared Guiness Securities a defaulter with effect from 8 May 2019 and expelled it from the exchange. When BSE reviewed the matter, it confirmed that the disputed trades appeared under Puja Rungta’s PAN and had been executed through Guiness Securities under the relevant client code.
However, BSE informed her that it could not proceed further with the complaint because the trading member had already been declared a defaulter.
The presence of the trades in the exchange data therefore established that transactions had been recorded against her PAN. It did not, by itself, conclusively establish that she had authorised or knowingly participated in them.
Missing Contract Notes Became the Deciding Factor
To examine the investor’s defence, SEBI advised BSE to obtain contract notes, payout information and the broker’s account statements relating to the disputed transactions.
A contract note is a primary transaction document issued by a broker. It ordinarily records information such as the security or contract traded, price, quantity, time, brokerage and other charges. It can help establish the execution of a trade and its connection with a particular client.
BSE attempted to obtain the relevant records, but Guiness Securities did not respond despite several reminders. Since the broker had been expelled and was no longer operational, the required documents could not be produced.
SEBI consequently found that the primary evidence necessary to establish the execution of the trades by Puja Rungta was unavailable.
Due to this evidentiary gap, the Adjudicating Officer dropped the proceedings and disposed of the show-cause notice without imposing any monetary penalty.
The order did not conclude that the disputed reversal trades had never taken place. Instead, it recognised that their appearance against an investor’s PAN was insufficient to prove her responsibility when authorisation was disputed and the primary transaction records were missing.
Why Documentary Evidence Matters
The case highlights a fundamental principle of regulatory proceedings: allegations must be supported by evidence connecting the alleged conduct to the person facing action.
Exchange data may show that a trade was entered under a particular PAN or client code. However, where the investor disputes authorisation, additional records may be necessary to determine who instructed the transaction, how it was settled and who received the resulting financial benefit.
Contract notes, bank statements, client ledgers, emails, recorded instructions and payout records can become crucial evidence. The absence of these records can materially affect the regulator’s ability to establish responsibility.
At the same time, investors should not depend entirely on brokers to preserve these documents. If a broker defaults, closes operations or fails to cooperate, clients may struggle to reconstruct their transaction history years later.
Practical Lessons for Investors and Businesses
The order offers several important lessons:
- Regularly review trading and demat account statements for unauthorised activity.
- Preserve contract notes, broker ledgers, bank statements and tax records.
- Verify that the correct mobile number and email address are registered for transaction alerts.
- Immediately dispute unfamiliar transactions with the broker, exchange and SEBI.
- Avoid giving unrestricted trading authority without proper oversight.
- Reconcile investment income and trading profits with income-tax returns.
- Preserve evidence of complaints, emails and correspondence with intermediaries.
- Obtain professional assistance as soon as a regulatory notice is received.
An investor’s prompt complaint and ability to provide independent financial records can become critical when a broker’s documents are unavailable.
The Larger Takeaway
The decision demonstrates the difference between suspicious trading data and legally sufficient evidence against a particular person.
Although the transactions appeared under Puja Rungta’s PAN, she denied authorising them and produced bank and tax records supporting her position. When the broker failed to provide contract notes and payout records, SEBI could not establish the necessary connection between the investor and the alleged transactions.
For market participants, the case reinforces two responsibilities: investors must actively monitor their accounts, while intermediaries must maintain reliable records capable of demonstrating who authorised and benefited from each trade.
Shunyatax Global Insights
Investors and businesses should conduct periodic reconciliations of their demat accounts, trading statements, bank records and tax disclosures. Any unexplained transaction should be documented and reported immediately rather than discovered years later during regulatory proceedings.
If you or your business is facing challenges involving unauthorised trades, a SEBI show-cause notice, frozen securities accounts, broker default or PFUTP proceedings, Shunyatax Global can provide professional guidance to help you evaluate the financial records, prepare the necessary documentation and proceed with clarity and confidence.
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Disclaimer: This article is based on a publicly issued SEBI adjudication order and is intended solely for general information. It does not constitute legal, investment, tax or regulatory advice. Readers should consult qualified professionals for advice based on their specific circumstances.