sebi:19524

SEBI · SEBI · 2002-11-27 · V. K. CHOPRA, WHOLE TIME MEMBER

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Facts / Headnote

Penalty imposed: suspension of certificate of registration for 7 days

Provisions invoked

• s. 19

Regulations

• Reg. 7
• Reg. 4
• Reg. 13(4)
• Reg. 6
• Reg. 4(a)
• Reg. 4(b)

Parties

• Shankar Lal Chokhany (Kashi Prasad Chokhany)

Holding

The Whole Time Member held that the Broker, Shankar Lal Chokhany, executed 74 instances of synchronized trades in the scrip of Ranbaxy Laboratories Limited in violation of Regulation 7 read with clauses A(3) and (4) of the Code of Conduct under Schedule II of the Stock Brokers Regulations and Regulation 4(b) and (c) of the PFUTP Regulations, and imposed a minor penalty of suspension of his certificate of registration for a period of 7 days.

Full text

{Under Regulation 13(4) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 against Shankar Lal Chokhany (Kashi Prasad Chokhany), Broker, Calcutta Stock Exchange in the scrip of Ranbaxy Laboratories Limited} 1.0 BACKGROUND 1.1 Ranbaxy Laboratories Ltd. (hereinafter referred to as “Ranbaxy”) is engaged mainly in the business of manufacturing and marketing of pharma products. The price of the scrip of Ranbaxy moved up significantly from Rs.270/- in January 1999 to about Rs.1200/- in October 1999 accompanied by significant increase in volumes. Considering the above major spurt in price and volumes traded in the Exchanges particularly on the Stock Exchange, Mumbai (BSE), National Stock Exchange (NSE), Calcutta Stock Exchange (CSE) and Delhi Stock Exchange (DSE). Securities and Exchange Board of India (hereinafter referred to as “the Board”) conducted an investigation into the affairs relating to buying, selling and dealing in the shares of Ranbaxy against several brokers including Shankar Lal Chokhany (Kashi Prasad Chokhany), a broker of CSE (hereinafter referred to as “Broker”) bearing SEBI Registration no. INB030036811. 1.2 The Board after considering the Investigation Report, appointed an Enquiry Officer vide Order dated November 27, 2002 under Securities and Exchange Board of India (Procedure for holding Enquiry by Enquiry Officer and imposing penalty) Regulations, 2002 (hereinafter referred to as “Enquiry Regulations”) to enquire

SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 (hereinafter referred to as “Stock Brokers Regulations”) and Rules, Regulations and Bye-laws of Stock Exchanges. 1.3 The Enquiry Officer, after conducting an enquiry in accordance with the provisions of Regulation 6 of the Enquiry Regulations submitted a report dated November 14,, 2003 wherein he observed that the Broker had violated the provisions of SEBI circular No.SMDRP/POLICY/CIR-32/1999 dated September 14, 1999; Regulation 7 read with clause A(3) and (4) of Code of Conduct as specified in Schedule II of Stock Brokers Regulations and Regulation 4(b) & (c) of PFUTP Regulations. He recommended suspension of registration of the Broker for a period of six months. 2.0 SHOW CAUSE NOTICE & REPLY 2.1 Pursuant to the receipt of the said Enquiry Report, a Show Cause Notice dated December 05, 2003 was issued to the Broker, enclosing therewith a copy of the said Enquiry Report and advising him to show cause as to why the action as recommended by the Enquiry Officer or any other penalty deemed appropriate should not be imposed on him. 2.2 The Broker submitted his reply to the said show cause notice, vide letter dated December 24, 2003. In the said reply, the Broker stated that he had not indulged in synchronized/matching trades, which tampers with price discovery mechanism of the concerned exchange and also the smooth functioning of the market. 2.3 In the above reply, the Broker submitted that his reply dated July 18, 2003 which

proceedings may be considered in these proceedings and also informed that he did not want any personal hearing in the matter. Therefore, I am proceeding in the matter on the basis of the materials on record before me. 3.0 REPLY OF THE BROKER IN THE ENQUIRY PROCEEDINGS 3.1 I observe that the Broker submitted reply to the show cause notice issued in the enquiry proceedings vide its letter dated July 18, 2003. He inter alia submitted as follows: · The Broker stated that he had not executed any synchronized / matching trades in the shares of Ranbaxy during the period January 1, 1999 to October 31, 1999 with any of the other brokers of CSE including the broker(s) who dealt with the associates of Ketan Parekh / brokers. He also submitted that the trades were executed through the computerized system and the seller and buyer click the computer button at same time either to buy or to sell the shares, without knowing the identity of each other, and hence at times the transactions were held simultaneously. As such neither the buyer nor the seller was aware of the identity. · The Broker submitted that he had bought and sold approximately 95 lakh shares of Ranbaxy during the period January 1999 to October 31, 1999 and if a negligible quantity of 10 lakh shares of the Ranbaxy scrip had been found to be synchronized / matching trades, it is not deliberate or intentional on his part. 4.0 CONSIDERATION OF ISSUES & FINDINGS

Source: SecMarx — sebi:19524. 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.