A charge of fraud or manipulation in the securities market demands a higher standard of proof. AMLEGALS tests every element of the SEBI case — the trading data, the communication evidence, the statistical analysis — against that standard.
The Supreme Court in SEBI v Kishore R. Ajmera (2016) established that allegations of fraud and market manipulation under the PFUTP Regulations must be proved to a standard higher than a mere preponderance of probability. This means that SEBI cannot sustain a charge on the basis of trading patterns alone — it must demonstrate, with cogent evidence, that the pattern was the result of a manipulative design and not of legitimate market activity, coincidence or independent trading decisions.
AMLEGALS approaches PFUTP defence by reconstructing the trading record independently, testing SEBI’s correlation and timing analysis against alternative explanations, and challenging the admissibility and weight of the communication and beneficial-ownership evidence. Where the charge involves circular trading, synchronised orders or front-running, the factual matrix is invariably complex and data-intensive — and the defence must be equally so.
Reconstructing the trading data to test SEBI’s manipulation hypothesis against alternative explanations grounded in market conditions and legitimate trading intent.
Testing the admissibility and sufficiency of SEBI’s evidence — call data records, communication extracts, beneficial-ownership analysis and statistical correlation — against the higher standard of proof.
Drafting the reply to the show-cause notice and representing the noticee before the Adjudicating Officer in penalty proceedings under Section 15HA.
Contesting ex parte interim orders under Section 11B restraining access to the securities market, including stay applications before the SAT.
Evaluating settlement under the 2018 Regulations as an alternative to adjudication, calibrating the settlement amount against litigation risk and reputational cost.
Filing and arguing appeals before the Securities Appellate Tribunal under Section 15T and further to the Supreme Court under Section 15Z.
The SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations 2003, read with Section 12A of the SEBI Act 1992, define fraud broadly to include market manipulation, price rigging, circular trading, synchronised trading, front-running, mis-selling and any device, scheme or artifice to defraud in connection with dealing in securities. Regulation 3 prohibits dealing in securities in a fraudulent manner, and Regulation 4 lists specific manipulative and deceptive devices.
The Supreme Court in SEBI v Kishore R. Ajmera (2016) held that in proceedings involving allegations of fraud or market manipulation, the standard of proof must be higher than a mere balance of probability — closer to the preponderance standard with a higher degree of probability. SEBI must establish the charge with cogent evidence and not merely on the basis of suspicion or statistical coincidence.
SEBI’s Integrated Surveillance Department monitors unusual price and volume movements, order-book patterns and trading behaviour in real time. When an alert is triggered, the investigation division examines trading data, beneficial ownership, call data records, bank statements and communications to establish whether the trading pattern was manipulative. The investigation report forms the basis of the show-cause notice.
Front-running occurs when a person with advance knowledge of a large impending order trades ahead of it to profit from the anticipated price movement. It is charged under Regulation 4(2)(q) of the PFUTP Regulations. SEBI establishes the charge through trading data, timing analysis, communication records and the relationship between the front-runner and the source of the information about the impending order.
Section 15HA of the SEBI Act provides a penalty of not less than ₹5 lakh, which may extend to ₹25 crore or three times the profit made, whichever is higher, for fraudulent and unfair trade practices. SEBI may also issue disgorgement directions, debarment from the securities market and directions under Section 11B. Criminal prosecution under Section 24 can result in imprisonment up to ten years.
No. No engagement is treated as accepted until conflicts, scope and terms are confirmed in writing.
Share the SEBI notice or investigation reference for a confidential assessment of the PFUTP charge.