sebi:DSP/AO/DRK/AS/EAD-17/2009
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Facts / Headnote
Violation not established; adjudication proceedings disposed of without penalty
Provisions invoked
- s. 15A
- s. 15
Regulations
- Reg. 199
- Reg. 26
- Reg. 25
- Reg. 25(i)
Parties
- DSP Merill Lynch Ltd.
Holding
The violation of Regulation 26(ii) of the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 was not established against DSP Merill Lynch Ltd. for failure to furnish telephonic records to SEBI, and no penalty was imposed under Section 15A of the SEBI Act read with Regulation 25(i).
Full text
Page 2 of 8 requisite telephonic records called for by SEBI, it was alleged to have contravened the provisions of Regulation 26 (ii) of the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 (hereinafter referred to as the ‘SEBI Brokers Regulations’) thereby making it liable for action under Section 15A of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the ‘SEBI Act’) read with Regulation 25 (i) of the SEBI Brokers Regulations and hence the present case. APPOINTMENT OF ADJUDICATING OFFICER
Page 3 of 8 2009, the noticee was advised to attend the hearing on the scheduled date i.e. on February 19, 2009. The noticee attended the personal hearing on February 19, 2009 through its Counsel Mr. P.N. Modi and AZB & Partners, Advocate and Solicitors and made submissions. The noticee also filed its written reply dated February 18, 2009 during the personal hearing i.e. after a lapse of more than three years. When asked the reasons for undue delay in filing the reply, the noticee stated that there is ‘no special reason’ for such a delay in furnishing the reply to the show cause notice.
Page 4 of 8 Telephonic Records sought by SEBI and that too much prior to the first instance when the noticee was approached by SEBI, i.e September 10, 2004. d. It may be noted that the DSP Merill Lynch Ltd policy is an internal requirement of the noticee which is consonant with the global policy of Merrill Lynch in relation to retention of telephonic records. The policy is not a result of a legal mandate that directs the noticee to maintain telephonic records, but an internal tool to ensure stringent quality standards. Therefore, it cannot be contended that the noticee failed to maintain such Telephonic Records as there is no such requirement. e. It is reiterated that there is no legal mandate that requires brokers to maintain telephonic records for any specific period of time. In view of the same, whereas not all stock brokers in the market tape telephonic conversations, some brokers who have such practice have their own policies in this regard. In absence of any law mandating maintenance of such tape records for specified periods of time, it would not be in the interest of justice to hold a broker liable for implementation or compliance with its own policies. f. In the absence of any legal obligation for the noticee to: a) record telephone conversation; b) retain such recordings for a specific period, DSP Merill Lynch Ltd cannot be held liable for not possessing the Telephonic Records.
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Source: SecMarx — sebi:DSP/AO/DRK/AS/EAD-17/2009. 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.