Mansukhlal Hiralal & Company

The Securities and Exchange Board of India (SEBI), vide an ex-parte interim order dated 3 July 2025 (Order), issued under Sections 11(1), 11(4), 11B(1), and 11D of the SEBI Act, 1992, has restrained entities of the Jane Street Group, LLC (JS Group) from participating in the Indian securities market and directed the impounding of alleged unlawful gains amounting to INR 4,843.57 crore. This action follows SEBI’s investigation into prima facie manipulative trading practices by JS Group entities in the BANKNIFTY and NIFTY indices, particularly on derivative expiry days, spanning from 1 January 2023 to 31 May 2025. Brief Background and Facts: Entities Involved: The JS Group entities named in the order are JSI Investments Private Limited , JSI2 Investments Private Limited , Jane Street Singapore Pte Ltd, and Jane Street Asia Trading Limited, all wholly owned subsidiaries of JS Group , a US-based global trading firm. These entities were identified as acting in concert, with their activities viewed as a single economic group for the purpose of the order.   Alleged Manipulative Strategy: Intra-day Index Manipulation (BANKNIFTY): SEBI identified 15 instances of alleged manipulation in BANKNIFTY index options on expiry days. On 17 January 2024, for example, during Patch I (09:15 AM to 11:46:59 AM), JS Group aggressively accumulated long positions worth INR 4,370.03 crore in BANKNIFTY constituent stocks and futures, inflating the index level. Simultaneously, they built short positions in BANKNIFTY index options, with a delta exposure rising from negative INR 7,311.19 crore to negative INR 39,426.15 crore. In Patch II, JS Group sold off INR 5,372 crore worth of these securities, exerting downward pressure on the index, aligning with their short options positions, yielding a profit of INR 734.93 crore on that day. Extended Marking the Close (BANKNIFTY): On three days, including 10 July 2024, JS Group engaged in aggressive selling in the final 60 minutes of trading, notably from 14:30:00 onwards, in BANKNIFTY constituent stocks and index futures, to depress the index closing level, generating INR 560 crore in profits from options. Bullish Strategy (NIFTY): On 15 May 2025, JS Group executed a bullish strategy, aggressively buying NIFTY constituent stocks and futures in the final hours (13:00 to 14:00), pushing the index upward to benefit their bullish options positions. Trading Patterns and Impact: On January 17, 2024, JS Group’s net traded value in the cash segment was INR 1,851.57 Crores and INR 2,518.46 Crores in the futures segment for BANKNIFTY constituents. Their trading significantly influenced the index, with buy orders placed at or above the Last Traded Price (LTP) in Patch I and sell orders at or below LTP in Patch II, distorting price discovery. Across 15 BANKNIFTY expiry days, JS Group earned INR 3,914 crore in index options profits. The total illegal gains across 18 identified days (15 BANKNIFTY and 3 NIFTY) were computed at INR 4,843.57 crore. The total profit from index options during the examination period was INR 43,289 crore, offset by losses of INR 7,208 crore in stock futures, INR 191 crore in index futures, and INR 288 crore in cash equities, resulting in a net profit of INR 36,502 crore.   Prior Warnings: In February 2025, the National Stock Exchange (NSE), on SEBI’s instructions, cautioned JS Group against large cash-equivalent positions and questionable trading patterns. Despite responses on 6 February 2025 and 21 February 2025, JS Group continued similar practices, notably on 15 May 2025.   Regulatory Violations: SEBI found that JS Group’s actions contravened Sections 12A(a) and (b) of the SEBI Act, 1992, and Regulations 3(a), (c), (d), and 4(1) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations). Additionally, the netting of trades in the cash market violated Regulation 20(4) of the SEBI (Foreign Portfolio Investors) Regulations, 2019.   SEBI’s Ex-Parte Order The Whole Time Member (WTM) of SEBI determined that JS Group’s trading activities constituted a prima facie case of market manipulation. The Order highlights the following key findings: JS Group’s aggressive buying in the cash and futures markets of BANKNIFTY and NIFTY constituents, followed by rapid reversals, was designed to artificially influence index levels to benefit their larger positions in index options. The trading patterns, particularly on expiry days, demonstrated intent to manipulate closing prices, impacting the settlement value of index-based contracts and misleading other market participants. The scale of intervention, with significant traded volumes and a high concentration of orders at or above/below the Last Traded Price (LTP), indicated a deliberate strategy to distort price discovery. JS Group violated Regulation 20(4) of the SEBI (Foreign Portfolio Investors) Regulations, 2019, by netting trades in the cash market through simultaneous intra-day buying and selling of BANKNIFTY constituent stocks without actual delivery.   Directions SEBI’s interim order issued the following directions to address the alleged manipulations and protect market integrity: - JS Group entities are directed to jointly and severally deposit INR 4,843.57 crore, identified as unlawful gains, into an escrow account with a scheduled commercial bank in India. JS Group entities are restrained from accessing the Indian securities market and prohibited from buying, selling, or otherwise dealing in securities, directly or indirectly, until further orders. Banks, depositories, and custodians are instructed to ensure no debits are made from JS Group’s accounts without SEBI’s permission, though credits are allowed. Stock exchanges are instructed to monitor JS Group’s future dealings closely to prevent further manipulative activities. JS Group entities are ordered to cease and desist from engaging in any fraudulent, manipulative, or unfair trade practices. The directions stipulated in the clauses above will cease to apply upon compliance with directions for the disgorgement of INR 4,843.57 crore. Further, the entities have been directed to respond and explain why further directions should not be taken against the entities.   MHCO Comment This is SEBI’s strongest-ever action against a trading firm, signalling that investor protection outweighs high-frequency or quantitative trading advantages. The impounding of INR 4,843.57 crores and the restraint on securities trading reflect SEBI’s proactive approach to prevent further market abuse and ensure investor confidence. This crackdown signals SEBI’s heightened scrutiny of foreign portfolio investors and their trading practices, emphasizing compliance with regulatory frameworks. The directive to monitor JS Group’s activities closely indicates a broader effort to curb systemic risks in the securities market. We believe this action will deter similar manipulative strategies and reinforce the importance of transparent and fair trading practices, ultimately benefiting retail investors and the broader economy.   Disclaimer: This legal update is based on the interim order issued by SEBI and is intended for informational purposes only. It does not constitute legal advice or a definitive interpretation of the regulatory actions taken. The views expressed in this update are personal and should not be construed as any legal advice; please contact us for any assistance.

The Securities and Exchange Board of India (SEBI), vide an adjudication order (Order) dated 21 February 2025 penalised Axis Securities Limited (Axis Securities) for several non-compliances with various regulatory circulars applicable to them. Brief Background and Facts: The SEBI inspection revealed several non-compliances related to enhanced supervision reporting, stock reconciliation, client fund settlements, passing on exchange penalties, improper handling of client securities, inadequate grievance redressal, discrepancies in PEP reporting, and excessive exposure in margin trading. Alleged Violations: The Show Cause Notice (“SCN”) outlined various violations thereafter confirmed in the Order. These alleged violations were: Discrepancies in Enhanced Supervision Reporting: Axis Securities had allegedly reported incorrect information in their enhanced supervision reports to the exchanges. Specifically: (a) An amount of ₹50 Lakhs was reported as collateral, when it was actually a deposit towards Base Minimum Capital (BMC) in NCDEX. (b) A Bank Guarantee of ₹1 Crore was reportedly double-reported in October 2022. Discrepancies in Stock Reconciliation: Reconciliation of weekly holding statements (WHS) submitted by Axis Securities to the Stock Exchanges with the actual stock lying in DP accounts as on 30 November 2022, revealed mismatches: (a) Stocks (ISIN – 13, Quantity – 11,174, Value – ₹0.37 Crores) were reported in the WHS but were not found in DP holdings. (b) Stocks (ISIN – 122, Quantity – 3,38,388, Value – ₹3.09 Crores) were not reported in the WHS but were present in DP holdings. (c) Investment of Axis Securities in Max Life Insurance Company Ltd. (Quantity – 1,91,88,128, Value – ₹242.21 Crores) in its proprietary account was not reported in the WHS. Improper Client Fund Settlement: Axis Securities had failed to settle clients’ funds and securities on a monthly/quarterly basis according to the preferences obtained from clients. Furthermore, the retention statements were not sent to the clients along with the statement of accounts. Passing on Exchange Penalties to Clients: Axis Securities purportedly passed on penalties imposed by Stock Exchanges for short collection of upfront/nonupfront margin to its clients. Transfer of Securities to "Client Unpaid Securities Account": Axis Securities is alleged to have transferred securities of clients having a credit balance of funds with the Axis Securities to a "client unpaid securities account,". Inadequate Grievance Redressal: Axis Securities allegedly failed to properly redress the complaints and grievances of its clients, that shows inadequate customer service and grievance resolution mechanisms. Discrepancies in PEP Reporting: The count of Politically Exposed Persons (PEP) reported under the Risk Based Supervision data submitted by Axis Securities to the Stock Exchange did not align with the clients marked as PEP in the Unique Client Code (UCC), indicating inaccurate reporting of PEP clients under Risk Based Supervision data. Excessive Exposure in Margin Trading: The exposure of Axis Securities towards Margin Trading funding exceeded the allowable threshold. Additional exposure of ₹17.40 Crores was given to clients in six instances. Moreover, there was a shortfall in the margin collected from one client. Mitigating Factors Considered: The Adjudicating Officer considered the following mitigating factors for computing the quantum of penalty: Axis Securities engaged Shah Kapadia & Associates, an external audit firm, for verification of data before reporting of WHS to the exchanges and to review and verify the process of settlement of client funds. Axis Securities took corrective action and immediately started including the investment in Max Life Insurance Company Limited in its WHS reporting. NSE had already penalized Axis Securities for the discrepancy in WHS reporting. SEBI's Decision: After considering the inspection report, the SCN, and Axis Securities' reply, SEBI passed an order finding that Axis Securities have violated various circulars of SEBI, MCX, NCDEX, etc. Accordingly, SEBI imposed a penalty of ₹10,00,000/- (Rupees Ten Lakhs Only) on Axis Securities Limited under Section 15HB of the SEBI Act. This order against Axis Securities underscores SEBI's focus on maintaining the integrity of the securities market and protecting investors' interests. By addressing discrepancies in reporting, client fund handling, and adherence to margin requirements, SEBI aims to ensure that stock brokers uphold the highest standards of regulatory compliance and prioritize investor protection. The views expressed in this update are personal and should not be construed as any legal advice. Please contact us for any assistance. Authored By:  Mr Bhushan Shah, Partner and Mr Abhishek Nair, Associate.

Overview: A recent Circular dated 29 January 2025 issued by the Securities and Exchange Board of India  (‘SEBI’) provides imperative clarifications regarding the association of persons regulated by  SEBI, market infrastructure institutions (MIIs), and their agents with individuals or entities  engaged in prohibited activities. This circular serves as a follow-up to the earlier circular dated  22 October 2024 (‘October Circular’). Essentially, the present circular marks a significant  regulatory shift aimed at curbing the activities of unregistered financial influencers, commonly  referred to as "finfluencers". This directive prohibits the influencers from using live stock  prices in their educational content, requiring them in the alternative, to refer to stock prices  that are at least three months old. This change is expected to have profound implications for  the finfluencer industry. Key highlights of the Circular: Regulatory Background: The circular references amendments to various regulations, including the Securities  and Exchange Board of India (Intermediaries) Regulations, 2008, and others, which  were published on August 29, 2024. These amendments restrict associations with  individuals or entities that provide unregistered advice or make unpermitted claims  regarding securities. Prohibited Activities: The regulations prohibit any direct or indirect association with persons who: a) Provide advice or recommendations related to securities without SEBI registration; b) Make claims regarding returns or performance related to securities without SEBI  permission. III. Clarifications Provided: The circular includes an annexure containing certain frequently asked questions that  clarify the following; a) Definitions of ‘persons regulated by the Board’ and ‘agents’ b) Responsibilities of regulated entities to ensure that associated individuals do not engage in prohibited activities c) The distinction between investor education and prohibited advisory roles. Compliance Requirements: Regulated entities must ensure compliance with these provisions and are advised to  terminate existing contracts with individuals engaged in prohibited activities within  three months from the October 2024 circular's issuance. This compliance is crucial for  maintaining regulatory standards and protecting investor interests. Investor Education allowed with certain restrictions: While genuine investor education is still permitted, it must strictly adhere to the new  guidelines. This includes avoiding any performance claims or investment  recommendations unless the educator is a SEBI-registered entity. Consequences for violations: The circular outlines potential actions SEBI may take against violations, including  penalties, suspension, or cancellation of registrations. It emphasizes the importance  of adhering to these regulations to avoid severe repercussions. Expected Outcomes: Reduction in misleading practices: By closing this loophole, SEBI aims to reduce misleading investment claims that have  proliferated in the finfluencers space, thereby enhancing investor protection and  market integrity. Challenges for Social Media Influencers: Many influencers who relied on live market data for their content may find their  business models unsustainable. The shift could lead to a significant restructuring  within this sector as they adapt to the new regulations or face potential subscriber  losses. III. Stringent Enforcement: SEBI's recent action is part of a larger initiative to strengthen compliance within the  financial system. This could result in tougher measures against deceptive stock market  content and promote the idea that investors should consult only registered  professionals for advice. MHCO Comment: This circular ensures that finfluencers are restricted from selling stock tips on various social  media platforms. This regulatory change represents a critical step in addressing the challenges  posed by unregulated financial advice in India, aiming for a more transparent and safer  investment environment for retail investors. Authored By: Mr Bhushan Shah, Partner,  Ms. Shreya Dalal, Associate Partner and Mr Gaurav Edekar, Associate. This article was released on 3 February 2025. The views expressed in this update are personal and should not be construed as any legal  advice. Please contact us for any assistance.

Background The Reserve Bank of India (RBI), through a press release dated 16 January 2025,  introduced amendments to several regulations made under the Foreign Exchange  Management Act 1999 (FEMA). These amendments aim to enhance the use of the  Indian Rupee (INR) in cross-border transactions. This initiative is a significant step  towards reducing dependency on foreign currencies and increasing the global  acceptability of INR for trade and investment purposes. Amendments Brought In The key changes introduced by the amendments include: 2.1. Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt  Instruments) Regulations 2019: Foreign investors can now use repatriable rupee  accounts or foreign currency accounts for transactions, instead of earlier modes such  as NRE, NRO, FCNR(B), or escrow accounts. This applies to transactions including the  purchase/sale of equity instruments of Indian companies, investment/disinvestment  in LLPs, purchase/sale of units of investment vehicles, and purchase/sale of convertible  notes of startups. 2.2. Foreign Exchange Management (Deposit) Regulations, 2016: The amendments allow a  Person Resident Outside India (PROI) to open a Special Non-Resident Rupee (SNRR)  account with an Authorized Dealer (AD) Bank’s branch outside India, in addition to  domestic branches. The restriction on the maximum tenure of SNRR accounts  (previously capped at 7 years) has also been removed. Additionally, SNRR accounts  may now be used for all permissible current and capital account transactions, including  transactions among PROIs. 2.3. Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in  India) Regulations, 2015: Indian exporters are now permitted to open and maintain  foreign currency accounts with overseas banks for receiving full export value and  advance payments, which may be used for imports into India or must be repatriated  by the end of the next month. Brief Overview of the Effects of the Amendments The amendments streamline foreign investment processes and promote ease of doing  business by: 3.1. Expanding the flexibility of currency options for foreign investors. 3.2. Enhancing cross-border trade settlements in INR by enabling transactions through Special Rupee Vostro Accounts (SRVA) and SNRR accounts. 3.3. Strengthening India’s position in global financial markets by facilitating seamless INR transactions. 3.4. Providing exporters with greater autonomy in managing their foreign earnings, improving liquidity and operational efficiency. 3.5. Enabling units in International Financial Services Centres (IFSCs) to open SNRR  accounts with AD banks in India for business-related transactions, thereby bolstering India's financial infrastructure. MHCO Comment: These amendments represent a progressive step towards internationalizing the INR. By  allowing broader use of INR in foreign transactions, India reduces reliance on hard currencies  like the USD and EUR, mitigating exchange rate risks. Moreover, the regulatory simplifications  make it easier for foreign investors to engage with Indian markets. However, the success of  these changes will depend on global acceptance of INR and reciprocal arrangements with  foreign trade partners. The removal of the SNRR account tenure cap and the expanded scope  for transactions could improve liquidity and promote investment. However, further  refinements may be needed to address practical challenges, such as liquidity management,  foreign investor confidence in INR settlements, and compliance with global financial norms. The amendments to FEMA regulations reflect India’s commitment to enhancing the global  utility of INR and facilitating foreign investments. While this is a significant milestone,  continued efforts are necessary to build confidence and establish INR as a preferred currency  for international trade and investment. The long-term success of these measures will depend on sustained policy support, market confidence, and international collaboration. Authored By: Mr Bhushan Shah, Partner,  Ms Shreya Dalal, Associate Partner and Ms Veena Hari, Associate. This article was released on 7 February 2025. The views expressed in this update are personal and should not be construed as any legal  advice. Please contact us for any assistance.

Background: The Hon’ble High Court of Bombay in the matter Wonderchef Home Appliances Pvt.  Ltd. v. Shree Swaminarayan Pty Ltd. held that a gag order under Section 9 of the  Arbitration and Conciliation Act, 1996 (“the Act”) can be granted, pending resolution  of disputes between the parties, if the contractual obligation between the parties  stipulates to protect the party’s reputation and not otherwise. Facts: The Respondent is a distributor of the Petitioner in Australia. The Respondent has been  sending out e-mails to various parties, including other distributors of the Petitioner in  other jurisdictions and various statutory addressees such as Government Officers and  prospective financial investors, complaining about the Petitioner's product having  demonstrated defects, the poor treatment of the Respondent by the Petitioner, and  the manner in which the relationship is being handled. Accordingly, in light of the  Distribution Agreement dated 26 December 2017 (“Agreement”) executed between  the Petitioner and Respondent, the Petitioner sought the present petition to injunct  the Respondent from making disparaging statements or taking any actions that may  harm or damage, malign or disparage the Petitioner's reputation and its brand name  “Wonderchef”. Issue for consideration: Whether a gag order to injunct commercial speech can be passed under the ambit of  Section 9 of the Act. Held: The Hon’ble High Court of Bombay stated that the scope of powers of this Hon’ble  Court under Section 9 of the Act is essentially to make interim measures of protection  with respect to the preservation of the subject matter of the agreement between the  parties, which is subject to resolution by arbitration. To be able to seek a gag order, the  Petitioner would need to show that the remarks of the Respondent are proscribed by  the agreement that contains the arbitration agreement and that, pending resolution of disputes, such remarks cannot be made. The Hon’ble Court, considered clause  12.2(c) of the Agreement, which required the distributor to conduct business in a  manner that reflected favorably on the Petitioner and its products. Given the  contractual obligation and the potential harm alleged by the Petitioner, the Hon'ble Court granted an interim injunction against the Respondent for 90 days following  clause 12.2(c) of the Agreement, restraining them from making statements that could  harm the Petitioner’s reputation and also stated that the Respondent shall not vitiate  the atmosphere for the arbitration by sending out e-mails attacking the Petitioner’s  reputation. MHCO Comment: The Hon’ble High Court of Bombay clarified that a gag order under Section 9 of the Act  can only be granted if there is a contractual obligation to protect a party’s reputation.  While the Hon’ble Court rejected the Petitioner’s claim of confidentiality breach, it  recognized the contractual duty under clause 12.2(c) of the Agreement to maintain the  Petitioner’s reputation. We believe that this judgment is a welcome step by the Hon’ble  Court to protect a Petitioner’s reputation, by injuncting the Respondent from  spreading derogatory information about the Petitioner, pending arbitration  proceedings. Authored by- Mr Bhushan Shah, Partner and Ms Alisha Dsouza, Associate. This article was released on 12 February 2025. The views expressed in this update are personal and should not be construed as any legal  advice. Please contact us for any assistance.