sebi:1293009805535

SEBI · SEBI · 2001-06-14 · A.K. BATRA, Whole Time Member

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Facts / Headnote

Debarred from associating with the securities market and prohibited from buying, selling or dealing in securities for a period of 5 years with immediate effect.

Provisions invoked

• s. 11B
• s. 11

Regulations

• Reg. 7
• Reg. 11
• Reg. 4(b)
• Reg. 5(e)

Parties

• M/s Indo Shares and Fintrade Ltd

Holding

SEBI held that Indo Shares and Fintrade Ltd, as a stock broker, violated Clause 1 to 4 of the Code of Conduct read with Regulation 7 of the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992, and Regulations 4(b) and (d) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 1995, and was not a fit and proper person under Regulation 5(e). SEBI debarred the broker from associating with the securities market for a period of 5 years.

Full text

07th July, 2000. Prior to this period the scrip of ETL had witnessed substantial movement in Madhya Pradesh Stock Exchange, Indore wherein the price spurted from Rs. 31 in December 1999 to around Rs. 400 by March 2000. In view of the substantial price movement in the scrip, SEBI had ordered investigations into the alleged price manipulation in the scrip of ETL vide Order dated 30th April, 2001. 1.2 The investigation relates to the period June 12, 2000 to July 07, 2000 and based on the investigation conducted by the BSE w.r.t an alert. Price went up from Rs. 520 to Rs. 634.75. It was observed by BSE that Hakeem Auto Ltd, Jem Fiscal Ltd, F.T Traders, K.N Traders, Prashant Traders were ultimate clients dealing in the scrip through different brokers and all the clients were apparently connected to each other. It was also observed by the BSE that the clients were involved in circular trading. The clients had entered into transactions with multiples brokers of the BSE to create an impression of liquidity. The clients were also among the top ten shareholders of the company. 1.3 The details submitted by M.P Stock Exchange for the period December 01, 1999 to July 31, 2000 showed that substantial quantity of shares were traded at the exchange during the period December 01, 1999 to March 14, 2000. After March 14, 2000 no trades were reported at the exchange and the exchange has given a confirmation to this effect. Incidentally, it is observed from the records submitted by the Stock Exch

exchange who have traded in the scrip during the period December 1999 to March 20000. The MP Stock Exchange was confirmed that prior to December 1999, the scrip was thinly traded and the price was in the range of Rs. 18/- to Rs. 30/- per share. 1.4 As per the information provided by the BSE, it is observed that the broker has been declared defaulter by the BSE. The broker has traded on behalf of M/s K.N Traders in the scrip of Eonour Software Ltd. The client and broker both have not submitted the details of their trading in the scrip. However, from the trading details submitted by the exchange it is observed that the broker has purchased and sold 15,300 shares. It is also observed from the investigation report submitted by the exchange that M/s K.N Traders was the client of the broker in settlement number 12 BSE. It may therefore, be assumed that all the transactions of Indo Shares & Fintrade were for K.N Traders only. SEBI vide its letters dated 14.6.01, 21.6.01, 23.7.01 and 23.11.01 advised the broker to appear before the investigating authority. However, the broker failed to do so. 1.5 Pursuant to the above, a show cause notice dated 08.05.2003 was issued asking the broker as to why an action under Section 11B of SEBI Act read with the provisions of Regulations 11 & 12 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 1995 should not be initiated. In reply to this, the broker submitted a letter dated 20.5.03 stating

14 days from the date of receipt of the letter. Whereas, the broker vide his letter dated _______requested for more time for filing its reply and time was granted upto September 05, 2003 for filing reply to the show cause notice dated 08.05.2003 issued by SEBI. However, the broker has neither filed any reply nor sought extension of time for filing its reply. 1.6 In the interest of natural justice, SEBI vide its letter dated 17.9.03 granted an opportunity of personal hearing in the matter before me on 03.10.03. Vide the said letter, it is also stated that in case of failure to attend the hearing, it will be presumed that the broker has no further submissions to make and the hearing would be proceeded further on the basis of material available on record. However, the broker failed to appear for the said hearing. 2.0 Issues for consideration and findings 2.1 I have examined the material available on record. The broker and the client viz. K.N Traders have failed to submit the details of the trading in the scrip of Eonour Software Ltd. I note that from the trading details submitted by the BSE that the broker had purchased and sold 15,300 shares in the scrip of Eonour Software Ltd on behalf of his client M/s K.N Traders. It is also noticed from the investigation report submitted by the exchange that M/s K.N Traders was a client of the broker in settlement no. 12 of BSE which gives rise to the assumption that all the transactions of the broker were for K.N Traders only. 2.2 The clie

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