sebi:CO/22/ISD/09/2004

SEBI · SEBI · 1999-09-14 · 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 of CSFB suspended for a period of three months, effective after expiry of three weeks from the date of the order.

Regulations

• Reg. 7
• Reg. 13(2)
• Reg. 25

Parties

• M/s Credit Suisse First Boston (India) Securities Private Limited

Holding

CSFB violated Clause A(4) of the Code of Conduct under Schedule II of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, and thereby Regulation 7, by entering into synchronized transactions with Ketan Parekh-associated stock brokers that interfered with the fair and smooth functioning of the securities market. The penalty of three months' suspension recommended by the Enquiry Officer was imposed, and the double jeopardy defence was rejected.

Full text

Page 2 of 23 (hereinafter referred to as stock broker regulations) by CSFB in respect of their dealing in the shares of GTB. 2.1 The Enquiry officer issued show cause notice to CSFB on 29.9.2003 and also afforded an opportunity of personal hearing to them on 11.12.2003. Thereafter the Enquiry Officer submitted his report to SEBI on 19.03.04 recommending that the certificate of registration granted to CSFB may be suspended for a period of 3 months. 2.2 In his report, the Enquiry Officer has made the following findings: (i) CSFB entered into a large number of cross deals in the scrip of GTB in violation of SEBI circular dated 14/09/99 which prohibits cross deals. CSFB also entered into large number of synchronized deals with Ketan Parekh entities (hereinafter referred to as “KP entities”) in violation of clause (4) of the code of conduct under Schedule II of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992. (ii) By entering into cross and synchronized trades, CSFB created artificial volumes in the scrip of GTB in a manner which is in violation of clause (4) of the code of conduct under Schedule II of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992. Kallar Kahar Investment Ltd. a FII sub account of CSFB was used for parking of shares, building up of concentrated position for creation of artificial volumes in the scrip of GTB. 4.0 Consequent to the submission of report by the Enquiry Officer, show cause notice dated 31.03.04 under Regulation 13(2) of SEBI (Procedure

Page 3 of 23 as to why penalty as may be considered appropriate including the penalty recommended by the Enquiry Officer should not be imposed on them. 4.1 CSFB vide its letter dated 12.04.04, replied to the said show cause notice as under: (1) That CSFB had already gone through the rigorous investigation and enquiry proceedings in the year 2001and 2002 in respect of its deals in certain scrip including GTB. In the course of the said investigations, SEBI expressly required, inter alia, by its letters sated 29th January 2001 and 20th March, 2001, details of CSFB’s dealing in the shares of GTB scrip for the period of September 1, 2000 to January 25, 2001 and August 1, 1999 to August 31, 2000 respectively. CSFB had submitted to SEBI voluminous data in relation to and details of its transactions in various stocks including of GTB and with KP entities. In particular, CSFB had submitted to the Investigating Officer the details of transactions executed in the shares of GTB during the period 1 August 1999 to 25 January 2001 by its letter dated 22nd March 2001which covers all transactions during the period November 1999 to January 2000 (hereinafter referred to as “Relevant Period”) which includes the transactions on 22, 24 and 29 November 1999, 1, 2, 3, 6, 7 and December 1999 and 6 January 2000(hereinafter referred to as “Relevant dates”) It is therefore apparent that the investigations already conducted also expressly covered the transactions in GTB shares during the said period. (2)

Page 4 of 23 broker till further orders were passed by SEBI in this regard. The said order was made after the submissions by CSFB of details of its transactions, inter alia, in GTB scrip and with KP entities during the period August 1 1999 to August 31, 2000 which included the Relevant Period and as such exfacie the transactions in GTB shares on Relevant dates were considered by SEBI in making the said interim order. (3) At the stage of Affirmation order SEBI had already taken into consideration the transactions executed by CSFB in the shares of GTB on Relevant dates and therefore the Enquiry Officer has erred in law in finding that CSFB‘s dealings in the shares of GTB on the Relevant dates and during the Relevant Period were not covered by the earlier investigation. The subject\t matter of the present enquiry i.e. synchronized transactions with KP entities and assisting in creation of artificial volumes were already covered by and subsumed in the Final Order. There are no fresh allegations or offences alleged in this new Enquiry Report. Thus the present enquiry and its findings are unsustainable in law as it amounts to punishing a person twice for the same offence, which have been adjudicated and resolved upon by SEBI. (4) SEBI’s circular dated 14th September 1999 and BSE’s Circular dated 25th September 1999 permits and contemplates synchronized transactions. It is clear that after 14th September 1999, negotiated deals were not prohibited but were merely subject to the requi

Source: SecMarx — sebi:CO/22/ISD/09/2004. 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.