sebi:IVD-3/PKB/JJS/ESL-ER/4719/2004

SEBI · SEBI · 2004-03-08 · Madhukar, Whole Time Member

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Facts / Headnote

Certificate of Registration of M/s. Shivam Investments suspended for a period of 2 months

Provisions invoked

• s. 11
• s. 19

Regulations

• Reg. 4
• Reg. 13
• Reg. 15

Parties

• M/s. Shivam Investments

Holding

M/s. Shivam Investments, a sub-broker, was found to have violated Clause A (2) of the Code of Conduct under Regulation 15 of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 and Regulations 4(b) and (d) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995. Its Certificate of Registration was suspended for a period of two months.

Full text

Stock Exchange (ASE), Madras Stock Exchange (MSE), The Stock Exchange, Mumbai (BSE) and Madhya Pradesh Stock Exchange (MPSE). Listing of the shares at MSE and BSE was done after the takeover by the new management. After the takeover, the registered office of ESL changed from Indore (MP) to Chennai. The public holding in ESL excluding other body corporates is about 6.3 lakh shares or 21% of the paid up capital of ESL. Further, out of the total 1,248 shareholders, only 4 shareholders were holding about 79% of the equity capital. This shows that the shares of company are in limited hands. M/s. Shivam Investments (hereinafter referred to as Shivam), Sub-Broker to Joindre Capital Services Ltd. and registered with Securities and Exchange Board of India (hereinafter referred to as SEBI) vide SEBI Registration No. INS O10430713/01-07667 had traded in the shares of ESL on behalf of M/s. K. P. Investment and M/s. Prashant Investment. Trading for Prashant Investment: Settl. No. Gross Purchases Gross Sales Net 12 9,500 9,500 0 13 12,600 12,700 -100 14 1,000 900 100 15 1,000 1,000 0 16 2,000 2,000 0 17 1,000 1,000 0 22 2,600 2,600 0 24 2. 3.

3,700 3,700 0 Total 33,400 33,400 0 Trading for K. P. Investments Settl. No. Gross Purchases Gross Sales Net 25 9,500 9,500 0 Total 9,500 9,500 0 It was observed from the trading details that the clients were squaring off their positions at the end of each settlement. The details submitted by Shivam / its clients suggest that the clients used to square off their positions either on the same day or within the same settlement. It was observed that Shivam had not taken appropriate margin from the client and had also allowed the clients to trade in substantial quantity even though the stock was completely illiquid. In view of the above, an enquiry officer was appointed by SEBI, vide order dated 18th February, 2002, to conduct an enquiry into the dealings of Shivam in the scrip of ESL for possible violation of the following provisions: Rules, Bye-laws and Regulations of the Stock Exchange, Mumbai; Provisions of the Securities and Exchange Board of India Act, 1992, the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992; and Provisions of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995. Enquiry report and recommendation 1. 2. 1. 2. 3.

The enquiry officer, after conducting the enquiry as per the prescribed procedure submitted a report on February 28, 2004. The enquiry officer found Shivam guilty of violating the following provisions: a. Clause A (2) of the Code of Conduct prescribed in Schedule II in terms of Regulation 15 of Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 and b. Regulations 4 (b) and (d) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995. Consequently, the enquiry officer recommended a minor penalty of suspension of Certificate of Registration of Shivam for a period of two months. Show-cause notice and reply Pursuant to the submission of enquiry report, a show cause notice (No. IVD-3/ PKB/JJS/ESL-ER/4719/2004) dated 8th March, 2004 was issued to Shivam along with a copy of the enquiry report and the same was received by Shivam on 10th March, 2004. Shivam was informed that its reply, if any, should reach SEBI within a period of 15 days of the receipt of notice, failing which it would be presumed that it had no explanations to offer and SEBI would be free to take such action as it deems fit. Shivam neither replied to the show cause notice nor sought time to reply to the said notice. Consideration of issues I have considered the enquiry report and the findings contained therein. I note that Shivam has chosen not to reply to the show cause notice dated 08.03.04

Source: SecMarx — sebi:IVD-3/PKB/JJS/ESL-ER/4719/2004. 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.