sebi:10586

SEBI · SEBI · 1999-09-14 · Madhukar, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Minor penalty of censure imposed

Provisions invoked

• s. 19

Regulations

• Reg. 13(4)
• Reg. 5
• Reg. 200

Parties

• Raj Overseas & Finance Pvt. Ltd.

Holding

Raj Overseas & Finance Pvt. Ltd., sub-broker bearing registration No. INS230782836 affiliated to ISE Securities & Services Ltd., was censured and advised to be careful in future and diligently adhere to the SEBI Act, Regulations and Circulars for undertaking principal-to-principal trades and failing to segregate client funds.

Full text

alleged violations of provisions of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”), Rules, Regulations and Circulars made there under. The inspection revealed various irregularities and violations including those of principal to principal trading and non segregation of client funds from its own funds; and whereas, an enquiry officer was thus appointed by SEBI under Regulation 5 of SEBI (Procedure for holding enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to as “Enquiry Regulations”) to enquire into the alleged contravention of SEBI Act, Securities Contract (Regulation) Rules, 1957, SEBI (Stock Brokers & Sub-Brokers) Regulations, 1992 (hereinafter referred to as “Broker Regulations”), SEBI (Stock Brokers & Sub-Brokers) Rules, 1992 (hereinafter referred to as “Broker Rules”), SEBI Circulars, and, whereas, the Enquiry Officer after conducting the enquiry in terms of the Enquiry Regulations and while finding that in the facts and circumstances of the case and the reply by the sub broker, albeit the other charges against the sub broker can not sustain, concluded that the sub broker by undertaking Principal to Principal trade is guilty of violating the provisions of SEBI circulars SMDRP / Policy / Cir-32 / 99 dated September 14, 1999 and SEBI / SMD / MDP / CIR / 043 / 96 dated August 05, 1996. The enquiry officer also observed that the sub broker did not make segregation of client funds from its own

cause as to why action as may be considered appropriate should not be taken against it ; and whereas, the sub broker replied to the said show cause notice vide its letter dated February 21, 2005 and interalia submitted that principal to principal trades were mainly in the shares which were not traded on NSE and shares sold by it were out of its own investments and not on behalf of any clients. The sub broker further submitted there was no communication from its broker about the prohibition in this regard. Regarding non segregation of client funds from its own funds, the sub broker submitted that this was due to ignorance and it has not misused client funds. It was also submitted that it has now been maintaining properly segregated clients Account and own Account and therefore, kind judgment may be taken; and whereas, it is observed that the enquiry officer having considered these

PLACE: MUMBAI MADHUKAR WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Source: SecMarx — sebi:10586. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.