sebi:15404

SEBI · SEBI · 2003-01-28 · 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

Certificate of Registration suspended for four months

Provisions invoked

• s. 19

Regulations

• Reg. 4
• Reg. 7
• Reg. 13(2)
• Reg. 13
• Reg. 13(4)
• Reg. 5

Parties

• M/s. Pawankumar Parmeshwarlal

Holding

The Broker was found guilty of violating Regulation 4 of FUTP Regulations, clauses A(1) to (5) of the Code of Conduct read with Regulation 7 of Stock Broker Regulations, and SEBI Circulars dated 14.03.1995 and 18.11.1993. His Certificate of Registration was suspended for a period of four months.

Full text

1.1 M/s. Pawankumar Parmeshwarlal (hereinafter referred to as “the Broker”) is a member of the Stock Exchange, Mumbai (hereinafter referred to as “BSE”) and is registered with Securities and Exchange Board of India (hereinafter referred to as “SEBI”) vide registration No. INB O10018813. 1.2 SEBI vide order dated 28.01.2003 appointed an Enquiry Officer under the provisions of Regulation 5 of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing

4.0 REPLY TO THE SHOW CAUSE NOTICE 4.1 The Broker replied to the above said SCN vide letter dated 09.09.2004 and submitted that they had traded in the scrip but had not manipulated pricing anywhere at all. They submitted it was a general market practice to provide temporary finance to the persons requiring immediate finance. This temporary financing was called “Spot Financing’. So many Broking Institutions were having such financing schemes. 4.2 They further submitted that neither they nor any of their family clients had even one single share of VBF except these financing transactions. In these transactions too, no open position of stock was there, not even for few seconds because the moment it was sold it was completely paid by reducing nominal percentage of 0.50% or so. They further submitted that neither they nor their clients had received any undue advantage. 4.3 As regards the finding of the Enquiry Officer that the payment for the purchases was made from the clients account by the broker since none of the purchasers (family members of the broker) had funds in their account, the Broker submitted that clients were frequently trading and their account was operated like a current account, as every now and then they would be required to make payment to the broker for their trades, at times it could be difficult to manage their obligations. As such they would like to keep their accounts and funds with the broker like current A/c. 4.4 They further submitted that it might be th

5.3 In view of the unusual movements in the price of the share and volumes traded, SEBI had examined the matter and prima facie found that one Mr Kamlesh J Shroff who is the nephew of PR Shroff, MD of VBF had sold the shares of VBF held by promoters and directors in off market deals through Maxwrth Finlease Pvt Ltd (hereinafter referred to as “MFL”) , a broking firm in which Mr Kamlesh Shroff was a Director. The purchasers in turn sold the shares so bought from Mr Kamlesh Shroff in the market, whereas Mr Kamlesh Shroff was simultaneously buying at the other end which resulted in creation of artificial volumes and rise in prices. Mr. Kamlesh Shroff and entities associated with him bought 8,79,500 shares of VBF, in the aforesaid period, constituting 63.52% of the traded volumes and sold 891,800 shares, constituting 64.41% of the traded volumes. I also observe that the broker had sold 5,30,500 shares of VBF in several transactions between settlement no. 37/99 and 07/00 during the period 10.07.00 to 08.09.00 on behalf of his family members. The settlement wise details of the sales in the scrip of VBF by the broker during the aforesaid period were as under: Client Relationship with broker Settlement No Sold Kanchan Singhania Kanchan Singhania Kanchan Singhania Kanchan Singhania Kanchan Singhania Sister 37/99-00 42/99-00 45/99-00 49/99-00 04/00-01 30000 38500 50000 30000 15000 P.L. Choudary P.L. Choudary P.L. Choudary Father 37/99-00 49/99-00 04/00-01 35500 10000 30000 Sarita Choud

Source: SecMarx — sebi:15404. 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.