sebi:190-210_209

SEBI · SEBI · 2004-07-31 · Madhukar, Whole Time Member

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Facts / Headnote

Penalty against Bonanza Stock Brokers Limited: no penalty recommended/none imposed (Enquiry Officer observed it was not a fit case). Penalty against Aadya Stocks Pvt. Ltd.: Certificate of Registration suspended for a period of four months, coming into force after 21 days from the date of the order.

Provisions invoked

• s. 19

Regulations

• Reg. 13(4)
• Reg. 5
• Reg. 15

Parties

• Bonanza Stock Brokers Limited
• Aadya Stocks Pvt. Ltd.

Holding

The order found that no penalty should be imposed on Bonanza Stock Brokers Limited for alleged circular trading in Kwality Dairy (India) Ltd. shares, and suspended the Certificate of Registration of Aadya Stocks Pvt. Ltd. for four months for violations of SEBI circulars and the Code of Conduct for sub-brokers.

Full text

Jan 13, 2006 | Orders : Orders of Chairman/Members SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER REGULATION 13(4) SEBI (PROCEDURE FOR HOLDING ENQUIRY BY ENQUIRY OFFICER AND IMPOSING PENALTY) REGULATIONS, 2002 AGAINST BONANZA STOCK BROKERS LIMITED MEMBER, BSE REGISTRATION NO. INB 011110237 FOR IRREGULAR TRANSACTIONS IN THE SCRIP OF KWALITY DAIRY (INDIA) LTD.  1.0 BACKGROUND 1.1 Bonanza Stock Brokers Ltd. (hereinafter referred to as ‘the broker’) is a Member of the Stock Exchange, Mumbai (hereinafter referred to as and is registered with Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) vide Registration No. INB 011110237. 1.2 SEBI conducted an investigation into the buying, selling or dealing in the shares of Kwality Dairy (India) Limited (hereinafter referred to as ‘KD ascertain whether there was any violation of the provisions of SEBI Act, 1992 and Regulations made thereunder including the provisions o (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. 1.3             Investigation revealed that 3288016 shares of KDIL were traded during the period April 23 to June 6, 2004 and the broker allegedly indu circular trading/ reversal of trades. 2.0 APPOINTMENT OF ENQUIRY OFFICER AND ENQUIRY REPORT: 2.1  SEBI vide order dated 31.07.2004 appointed an Enquiry Officer under the provisions of Regulation 5 of SEBI (Procedure for Holding Enq Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinaf

The sub-broker in its reply dated August 6, 2004 did not mention anything with regard to the aforesaid allegation. However, the sub-broker in its reply dated January 20, 2 Enquiry Officer submitted that a separate account is being maintained with ICICI Bank for clients.

I note that the Enquiry Officer observed that “since there is no mention of the other trades in the scrip during the period under investigatio difficult to ascertain whether the matching of the said trades was a deliberate attempt to manipulate the market or was it that these were th trades during the said period which made the matching inevitable”. I do not find any valid reason to differ with the findings of the Enquiry Of this regard inasmuch as there were no trades done by the broker in its account and all these trades were executed on behalf of its client. 4.6 The other issue which arises for consideration is whether the broker failed to exercise due diligence while dealing with his client. It was alleged that the broker was involved in 1371 transactions. However, it is pertinent to note that each order placed by the broker has bee and executed in a number of transactions and hence the broker cannot be held responsible for voluminous transactions. The broker in its rep stated that Chirag Pujara was their client and transacted from their branch office at Vashi. The broker has further stated that all the transact the above scrip were done by their client and they were not aware of any manipulation or circular trading done by their clients. I observe th broker had not done any proprietary trading in the scrip and hence it cannot be presumed that the broker would have had any pecuniary indulging in the alleged circular trading. Moreover, there is no evidence to prove that th

Source: SecMarx — sebi:190-210_209. 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.