SAT Reserves Order On Jane Street's Plea Over SEBI's Non-Disclosure Of Relevant Documents

The Securities Appellate Tribunal on Wednesday reserved its judgment in the appeals filed by the Jane Street Group entities challenging SEBI's interim order alleging manipulation of the BANKNIFTY and NIFTY indices.

A coram of Presiding Officer Justice P.S. Dinesh Kumar and Technical Members Meera Swarup and Dr. Dheeraj Bhatnagar heard arguments on whether SEBI had provided the entities with all relevant documents and material necessary to defend themselves against the allegations.

Jane Street argued that non-disclosure of relevant material violated the principles of natural justice and their right to a fair hearing. It contended that SEBI's ex parte interim order devoted considerable attention to January 17, 2024, with nearly 40 pages focusing on the trading activity on that day.

“I am saying that this constitutes a breach of natural justice and fairness. And I am saying that the well-settled law is all relevant material that must be disclosed to me as a facet of natural justice. So, my right to a fair hearing will be affected if all relevant or material documents and information is not provided to me.” the counsel argued

The counsel contended that Jane Street had repeatedly explained its trading strategy to SEBI and had also submitted a detailed 12 page representation explaining its approach and seeking clarification on any alleged violations. He argued that the entities could not effectively defend themselves without access to the relevant material underlying the allegations.

He particularly sought details concerning the time, price and quantity of trades executed by counterparties. While SEBI's interim order indicated that such details had been provided, Jane Street submitted that SEBI had acknowledged during the hearing that the counterparty specific information had not been furnished.

Opposing the plea, SEBI argued that it was required, at the present stage, to provide only the documents relied upon in the interim order, which had already been furnished to the entities. The regulator submitted that approximately 10 GB of data and material had been shared with them. The regulator further argued that the demand for additional material was an attempt to delay the proceedings.

During the hearing, the Tribunal asked “What exactly have they asked you?”

When the counsel indicated that a list of the requested material would be handed over, the Tribunal also considered the question of the extent of disclosure required at the interim stage.

Background

SEBI had passed an ex parte ad interim order against four entities of the Jane Street Group namely, JSI Investments Private Limited, JSI2 Investments Private Limited, Jane Street Singapore Pte Limited and Jane Street Asia Trading Limited, alleging that they manipulated the BANKNIFTY and NIFTY indices through coordinated trading in constituent stocks, stock and index futures, and index options.

The regulator alleged that the entities repeatedly bought underlying securities aggressively to push up the indices and subsequently sold them to drive prices down, while allegedly profiting from their larger options positions. SEBI identified 21 instances of alleged manipulation and estimated unlawful gains of approximately ₹4,843.57 crore. It consequently ordered the impounding of the alleged gains and imposed restrictions on the entities' access to the securities market pending further investigation.

For Appellants: M/s Khaitan & Co

For Respondent: M/s Vidhii Partners