sebi:16973

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

Certificate of registration suspended for a period of 3 months w.e.f August 1, 2002

Regulations

• Reg. 7
• Reg. 4
• Reg. 29(3)
• Reg. 29

Parties

• Shri Prakash K. Shah, Member, Mumbai Stock Exchange

Holding

The broker member was found not guilty of aiding and abetting price manipulation under the FUTP Regulations, 1995, but guilty of failing to exercise due skill, care and diligence under Clause A(2) of the Code of Conduct, and his certificate of registration was suspended for 3 months w.e.f August 1, 2002.

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 Act, 1992 , 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 Shri. Prakash K Shah , Member, The Stock Exchange Mu

was transacting through M/s Khandwala Shah & Associates . The broker member submitted before the investigating authority that average trading in the scrip of ARBL in each settlement was in the range of 60,000 to 80,000 shares. He further stated that normally the purchases were made on the first two days of the settlement and the sales were executed towards the end of the settlement. The settlement wise trading of the broker member for Shri Harinarayan Bajaj through M/s. Khandwala Shah & Associates, its sub broker are as follows : Trading, Delivery & Carry Forward (Badla) Position Of Amara Raja Batteries Ltd. From Aug 00 to March 01 Settl. No. Purchase Sales C/f Delivery A-30 13,740 Nil 13,740 Nil A-31 20,250 14,107 19,883 Nil A-32 61,257 81,200 (60) Nil A-33 23,268 23,208 Nil Nil A-34 10,000 10,000 Nil Nil A-35 62,150 62,150 Nil Nil A-36 1,07,926 1,07,926 Nil Nil A-37 1,02,401 1,02,401 Nil Nil A-38 1,20,065 1,08,403 11,662 Nil A-39 1,37,762 1,11,662 37,762 Nil A-40 1,55,000 1,47,762 45,000 Nil

A-41 62,075 91,075 5,010 10,990 A-42 2,05,273 2,05,273 5,000 10 A-43 1,60,000 1,60,000 Nil 5,000 A-44 1,18,993 1,00,000 18,993 Nil A-45 1,25,000 1,38,293 Nil 5,700 A-46 1,00,000 1,00,000 Nil Nil A-47 75,000 75,000 Nil Nil A-48 75,000 75,000 Nil Nil A-49 95,000 95,000 Nil Nil A-50 05-03-01 1,20,000 Nil 07-03-01 Nil 50,000 08-03-01 23,135 09-03-01 Nil 40,000 30,000 Nil TOTAL 19,50,160 18,98,460 21,700 It was admitted by the broker member before the investigating authority that on enquiry with his sub broker and other market participants in the last week of February, they came to know that Shri Shailesh Bajaj, a defaulter member of BSE was involved in the trading of the scrip. However, after few days the broker member submitted an affidavit stating that in fact Shri

Source: SecMarx — sebi:16973. 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.