The Supreme Court held that front-running by a person who is not a registered intermediary is prohibited under the SEBI (PFUTP) Regulations 2003. 'Fraud' in Regulations 3 and 4 is read broadly to cover any act that induces another to deal in securities, even without deceit, and Regulation 4(2)(q) is not confined to intermediaries.
Decided on 23 February 2016, this judgment confirmed that the standard of proof in SEBI enforcement is the preponderance of probabilities, allowing manipulative conduct to be established by an irresistible inference drawn from the totality of circumstances.
Decided on 8 February 2018, the Supreme Court held that synchronised reversal trades in NIFTY options are a fraudulent and unfair trade practice under the PFUTP Regulations, and that proof of market impact or intent to manipulate is not a necessary ingredient.
After nineteen years and three rounds of regulatory and tribunal scrutiny, the Supreme Court has set aside SEBI's fraud finding against Reliance Industries on the 2007 RPL trades — and ordered SEBI to refund the ₹250 crore the company had already deposited. A close reading of the disposal, what survives, and why the case will be cited for years on the question of disgorgement standards.