sebi:BM/AO-149/2013
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Facts / Headnote
Penalty imposed on the Noticee for violations of SEBI's Circular SEBI/MRD/SE/Cir-33/2003/27/08 dated August 27, 2003 and Clause A (2) and A (5) of Schedule II prescribed under Regulation 7 of the SEBI (Stock Broker and Sub-Broker) Regulations, 1992.
Provisions invoked
- s. 15
- s. 15J
Regulations
- Reg. 7
- Reg. 199
Parties
- Noticee (broker)
Holding
The Noticee violated SEBI's Circular dated August 27, 2003 by accepting third party payments on behalf of its clients, and violated Clause A (2) and A (5) of Schedule II of the Broker Regulations by failing to exercise due skill, care and diligence. A penalty of Rs. 8,00,000 was imposed under Section 15 HB of the SEBI Act.
Full text
Page 2 of 12 2. In view of the above it was alleged that the broker violated Clause A (2) and A (5) of Schedule II prescribed under Regulation 7 of SEBI (Stock Broker and Sub-Broker) Regulations 1992 (hereinafter referred to as the 'Broker Regulations') and SEBI’s Circular SEBI/MRD/SE/Cir-33/2003/27/08 dated August 27, 2003 (hereinafter referred to as 'the Circular'). Consequently, the above violation makes the Noticee liable for monetary penalty under Section 15 HB of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act').
Page 3 of 12 6. Thereafter Noticee applied for consent and the instant proceedings were kept in abeyance. Subsequently the High Powered Advisory Committee did not accept the consent terms proposed by the Noticee and the same was communicated to the Noticee. Hence, the proceeding kept in abeyance was commenced against the Noticee.
Page 4 of 12 iv) The Noticee, its directors and shareholders are not related to the clients. Further, the Noticee was not aware that the clients are related to Bank of Rajasthan. v) Due to the deadlines it is nearly impossible to verify each and every payment received. vi) Since the initial payments were received directly from the clients' bank accounts, the Noticee trusted the clients. vii) The Noticee cited judgments of the Hon'ble Securities Appellate Tribunal (SAT), including Samkit Share and Stock Brokers (dated August 31, 2004), and stated that irregularities like non collection of margin from clients, misuse of client funds and non segregation of clients' accounts, dealing with unregistered sub brokers have been
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Source: SecMarx — sebi:BM/AO-149/2013. 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.