sebi:CO/152/ISD/02/2005
This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.
Facts / Headnote
Censure of JM Morgan Stanley Private Limited (penalty reduced from recommended four-month suspension of certificate of registration to a warning/censure)
Provisions invoked
- s. 4(3)
Regulations
- Reg. 13(4)
- Reg. 13
- Reg. 13(2)
- Reg. 3
- Reg. 16
- Reg. 10
- Reg. 12
- Reg. 14(1)
- Reg. 1
- Reg. 6(1)
- Reg. 13(6)
- Reg. 4
- Reg. 45(4)
- Reg. 24(1)(d)
- Reg. 4(d)
- Reg. 24(4)
Parties
- JM Morgan Stanley Private Limited
Holding
SEBI found that JM Morgan Stanley Private Limited, as merchant banker, failed to make proper disclosures regarding the objects of the acquisition in the public announcement dated 13 October 2002, in violation of Regulation 24(1)(d), (4) and (5) read with Regulation 16(ix) and (xix) of the SAST Regulations and Rule 4(d) of the Merchant Bankers Rules read with the Code of Conduct. The penalty recommended by the Enquiry Officer (four-month suspension of registration) was reduced to a censure/warning.
Full text
Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ ORDER UNDER REGULATION 13(4) OF SEBI (PROCEDURE FOR HOLDING ENQUIRY BY ENQUIRY OFFICER AND IMPOSING PENALTY) REGULATIONS, 2002, AGAINST JM MORGAN STANLEY PRIVATE LIMITED, CATEGORY- I MERCHANT BANKER WITH SEBI REGN. NO. INM 000010361 IN THE MATTER OF PUBLIC ANNOUNCEMENT OF OFFER TO ACQUIRE SHARES OF LARSEN & TOUBRO LIMITED ON BEHALF OF M/s GRASIM INDUSTRIES LIMITED AND ANOTHER.
and failed to, satisfy itself regarding the objects and purpose of the acquisition of shares of L&T made by the acquirer from a former shareholder (RIL) as far back as 18 N 2001, and to determine the reasons for the premium paid in the light of the restrictive covenants contained in the Share Sale/Purchase Agreement, and that it ought to h such disclosures in the Public Announcement dated 13 October, 2002. The enquiry report makes various allegations against the Noticee. The Noticee, therefore, submi enquiry report travels beyond the Show Cause Notice dated 12 March, 2003 and is in breach of the principles of natural justice. The Noticee submits that the enquiry present show cause notice (to the extent that it travels beyond the original Show Cause Notice dated 12 March, 2003) must be quashed and/or set aside. It is well settled that findings in investigation cannot travel beyond the Show Cause Notice and any finding which travels beyond the Show Cause Notice is in breach of the p of natural justice. (Wimco Ltd V. UOI 1980 ELT 293, Collector V. ITC 1995 2 SCC 38).
presentation made to the Board of Grasim (in the preparation of which the noticee was advising Grasim) in fact expressly stated that the objective of the proposed tran inter-alia to average the cost of acquisition of shares by Grasim and to augment its holding beyond 15%. In the light of the above documents / understanding / information there is no rational basis or justification whatsoever for the enquiry officer to conclude that the Noti exercise its independent professional judgement to “ascertain whether the acquirer was in a position to influence the management or indeed acquired control or intend control of the target company”.
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Source: SecMarx — sebi:CO/152/ISD/02/2005. 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.