SEBI penalty reversed: Jio Financial Services wins appeal at SAT

The Securities Appellate Tribunal (SAT) overturned a SEBI direction that had levied a 17-lakh punishment on Jio Financial Services Ltd in 2017 for claimed manipulation in certain transactions involving long-dated Nifty options.

The crux of the matter

Reliance Industries Ltd (RIL) previously demerged its financial services business as Reliance Strategic Investments Ltd (RSIL), which was later renamed Jio Financial Services Ltd (JFSL). This development is connected to certain long-dated Nifty option transactions undertaken in 2017 by Reliance Strategic Investments and Morgan Stanley France SA.

The verdict came after the Reliance group firm filed an appeal against a SEBI ruling issued in June 2023, which levied a penalty of Rs 17 lakh on the company.

A court comprised of Justice Tarun Agarwala and Presiding Officer Meera Swarup overturned SEBI’s judgement, emphasising that the agency had not sufficiently reviewed the evidence. The court, in a 33-page decision, said, “To hold a simple one-way trade as manipulative when it is not a circular or re-versal trade and in the absence of any shred of evidence of a mutual arrangement with a motive to manipulate the market, the impugned order cannot be sustained and is quashed.”

In June 2023, SEBI issued an order accusing the business of breaking several PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms. According to the regulator, “The observations relating to the conduct of notice and other attending facts and circumstances of the case… when applied to the test of preponderance of probability, lead me to the undeniable conclusion that notice had engaged in manipulation of the premium of 11,400 PE at least on two trading days, August 8, 2017, and August 10, 2017.”

Earlier last month, SAT reversed a penalty imposed by SEBI on Reliance Industries Chairman Mukesh Ambani and two other businesses in a case involving suspected manipulative trading in the shares of Reliance Petroleum Ltd (RPL) in November 2007.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.