sebi:16972

SEBI · SEBI · 2001-03-09 · G.N. Bajpai, Chairman, SEBI

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

Facts / Headnote

Directed the broker member to be careful and cautious in future

Regulations

• Reg. 7
• Reg. 29
• Reg. 29(3)

Parties

• M/s. SMK Shares and Stock Brokers Pvt. Ltd.

Holding

The Chairman of SEBI directed M/s SMK Share & Stock Brokers Pvt. Ltd. to be careful and cautious in future in its dealings in the securities market, adopting the Enquiry Officer's recommendation that the broker member was not guilty of violating the code of conduct prescribed 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 sharesper 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. SMK Shares and Stock Brokers Pvt. Ltd., Member, Mumbai Stock Exch

had dealt in the scrip of ARBL in settlement no. 47 of BSE . The said transactions were executed on the behalf of its client, Shri Harinarayan Bajaj . The trading of the broker member on behalf of the above client are as under : SMK Shares & Stock Broking Pvt. Ltd. Trading ,Delivery and Carry forward ( Badla ) Position of Amara Raja Batteries Ltd. From Aug 2000 to March 2001 Settl. No. Purchase Sales C/f Delivery A-47 50,000 30,000 20,000 Nil A-48 Nil Nil 20,000 Nil A-49 Nil Nil 18,000 2,000 A-50 03.09.2001 10,000 Nil 30,000 (2,000) Total 60,000 30,000 0 Shri Dinesh S. Khemka, Director of the broker member stated that one Shri Shashikant Modi, who is known to the Directors of the broker member for the last 5 years introduced Shri Harinarayan Bajaj to the broker member. The broker member stated that they had done purchases for Shri Harinarayan Bajaj in Settlement No.47 and another in Settlement No.50 and was not aware about the dealings of its client with other brokers except for the dealings in JCL Securities Ltd., in small quantity. The broker member further stated that they had taken an amount of Rs. 13,11,000/- towards margin from Harinarayan Bajaj before executing the transactions for him. The broker member also informed that they had filed an arbitration case against Shri Harinarayan Bajaj in BSE in addition to the FIR lodged with EOW, Mumbai and had also sent a legal notice to Shri. Harinarayan Bajaj . SEBI, therefore, in view of the above facts, vide its order dated Ja

'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 and Unfair Trade Practices Relating to Securities Market ) Regulations, 1995 and SEBI ( Stock Brokers and Sub Brokers) Regulations, 1992. Accordingly the Enquiry Officer issued a notice dated February 28, 2002 along with the findings of the investigations related to the broker member's alleged involvement in the price manipulation 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. (2) The broker member had allowed the client, Shri. Harinarayan Bajaj to take position which is beyond the clients financial capabilities." 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 April 2, 2002 interalia stated before the Enquiry Officer that they had not undertaken any proprietary trades in the scrip of ARBL and had only undertaken carry forward transactions only between settl No.A-47 to A-50 while Shri Bajaj and his son were trading in the scrip of ARBL since August 2000 onwards. Further, the broker member stated that they had taken an initial margin @ 10% and t

Source: SecMarx — sebi:16972. 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.