sebi:16971

SEBI · SEBI · 2001-03-09 · G.N. Bajpai, Chairman, Securities and Exchange Board of India

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

Facts / Headnote

Direction to be careful and cautious in future; no monetary penalty imposed

Regulations

• Reg. 7
• Reg. 29
• Reg. 29(3)

Parties

• M/s Orbis Securities Pvt. Ltd., Member, National Stock Exchange

Holding

SEBI directed M/s Orbis Securities Pvt. Ltd. to be careful and cautious in future, agreeing with the Enquiry Officer's recommendation that the broker member was not guilty of violating the code of conduct under the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992.

Full text

On March 9, 2001, BSE closed the normal trading at 2 p.m. to facilitate the Badla session and the price at that time was Rs. 308.40/-. On that date, NSE was functioning till 4.30 p.m. and the price of the scrip fell to Rs.266.75/- and therefore on March 12, 2001, BSE adjusted the price of various scrips to that of NSE including that of 'ARBL'. The price of 'ARBL' further fell down and thereafter touched a low of Rs.78.50/- on March 19, 2001. It is also found that the volumes in the scrip of 'ARBL' were approximately 50,000-60,000 shares per day in October , 2000 and went up to around 8-15 lakhs shares per day in the month of February and first week of March, 2001 at both BSE & NSE. The average trading in the scrip of 'ARBL' from January to March 2001 went to the extent of 10-15 lakhs shares per day and this constituted approximately 30% of the free floating stock of 'ARBL' . Securities and Exchange Board of India ( SEBI ) received complaints regarding the market manipulations / irregularities in the trading in the scrip of 'ARBL' and therefore, SEBI ordered a detailed investigations in the matter to enquire into the alleged violations of the provisions of SEBI ( Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market ) Regulations, 1995 and SEBI ( Stock Brokers & Sub Brokers ) Regulations, 1992 and other Regulations and the role played by various persons / intermediaries including M/s. Orbis Securities Pvt. Ltd., Member, National Stock Exchange ( he

had dealt in the scrip of ARBL in settlement no. 10 / 2001. The above transactions were executed on the behalf of M/s. Khandwala Shah & Associates, sub broker registered with the broker member and it is observed from the records submitted by M/s Khandwala Shah & Associates that they had traded in the scrip of ARBL on behalf of Shri Harinaryan Bajaj. The trading of the broker member for M/s. Khandwala Shah & Associates is given as under : Orbis Securities Pvt. Ltd. Trading & Delivery Position of Amara Raja Batteries Ltd. From Aug 2000 to March 2001 Settl. No. Purchase Sales C/f Delivery N-10 09-03-01 40,000 40,000 0 Nil Shri Samit Gehlaut , the Chief Executive Officer of the broker member stated before the investigating authority that M/s. Khandwala Shah & Associates had done only one transaction in the scrip of ARBL on March 09, 2001. The broker member also stated that M/s. Khandwala Shah & Associates enrolled with them as clients and all the bills / contracts etc. were raised in the name of M/s. Khandwala Shah & Associates. The broker member further stated that they had lost an amount of Rs.85 lakhs for doing one transaction. SEBI, therefore, in view of the above facts, vide its order dated January 14, 2002 appointed an Enquiry Officer to enquire into the affairs of the broker member in its dealings in the scrip of 'ARBL' and for the possible violations of the provisions of rules, Bye Laws & Regulations of NSE, provisions of SEBI Act, 1992, SEBI ( Prohibition of Fraudulent a

in the scrip of 'ARBL'. The alleged charges leveled by the Enquiry Officer against the broker member were the following : A (1) "The broker member by virtue of its trading in 'ARBL' on behalf of Shri Harinarayan Bajaj had failed to exercise due skill and care in its dealings. and thereby violated Regulation 7, Schedule II of SEBI (Stock brokers & sub brokers) Regulations, 1992 ( hereinafter referred to as the 'said Regulations' ) . The broker member vide its letter dated March 19, 2002 interalia stated before the Enquiry Officer that they had done few transactions in the scrip of ARBL and the same were done on behalf of their clients M/s. Khandwala Shah & Associates and / or Shri. Pratik Sheth. The broker member further stated that there was only one transaction on the instructions of M/s. Khandwala Shah & Associates i.e. on March 9, 2001 and in the said transaction, M/s. Khandwala Shah & Associates purchased 40,000 shares of ARBL and for the said transaction the broker member took margin from its client . The broker member also stated that they executed a client agreement form with Shri. Pratik Sheth and before executing the transaction for any of its clients the broker member had taken sufficient margin . An opportunity of personal hearing was granted by the Enquiry Officer to the broker member on May 08, 2002 and the Enquiry Officer after conducting the enquiry and after perusing the reply of the broker member and the submissions made on behalf of the broker member found t

Source: SecMarx — sebi:16971. 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.