sebi:JS/DJ/21/2017
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Facts / Headnote
Penalty imposed on the Noticee for violations of Code of Conduct and SEBI circulars on cash transactions and AML framework
Provisions invoked
- s. 15
- s. 19
- s. 15H
- s. 15J
- s. 15I(1)
- s. 40A(3)
Regulations
- Reg. 6
- Reg. 9(f)
- Reg. 9
Parties
- Swan Securities Pvt Ltd
Holding
The Noticee, Swan Securities Private Limited, was held to have violated Clause A(2) and A(5) of the Code of Conduct in Schedule II read with Regulation 9(f) of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, read with SEBI Circular SEBI/MRD/SE/Cir-33/2003/27/08 dated August 27, 2003 (for accepting cash from clients) and SEBI Circular ISD/CIR/RR/AML/1/06 dated January 18, 2006 (for failure to adopt AML policy framework and appoint Principal Officer within prescribed time). A penalty of Rs. 6,50,000/- was imposed under section 15HB of the SEBI Act.
Full text
Adjudication Order in respect of Swan Securities Pvt Ltd in the matter of Swan Securities Pvt Ltd Page 2 of 16 Sl. Nature of findings in brief Alleged violations 2 Noticee received cash from its client Balkrishna Bavkar, client code RA1234 on April 14, 2013 and June 25, 2013 (Rs.4 lacs and Rs.7 lacs respectively). As per submissions of the Noticee, cash was received after dishonor of cheque, however, Noticee couldn’t provide documentary proof w.r.t the dishonoring of cheque given by the said client. Noticee did not reported the cash transactions to FIU-IND. For findings at Sl. 2 and Sl. 3: Clause A(2) and A(5) of Code of Conduct prescribed for Stock Brokers in Schedule II under Regulation 9 (f) of SEBI (Stock Broker and Sub-Brokers) Regulations, 1992, read with SEBI Circulars No SMD- 1/23341 dated November 18, 1993, SEBI/MRD/SE/Cir- 33/2003/27/08 dated August 27, 2003 and CIR/ISD/AML/3/2010 dated December 31, 2010. 3 NSE vide its regular inspection of the Noticee conducted during November 2013 observed that Noticee had carried out cash dealings with constituents in case of 4 instances out of 29 instances amounting to Rs. 19.29 lakhs. In this regard, NSE vide letter dated May 19, 2014 warned the Noticee to ensure non-recurrence of this violation and specifically given direction to send a report to FIU-IND to this effect even though the transactions do not meet the threshold. However, from the reply of Noticee dated January 27, 2015 to the SEBI inspection questionnaire, it was
Adjudication Order in respect of Swan Securities Pvt Ltd in the matter of Swan Securities Pvt Ltd Page 3 of 16 show cause as to why an inquiry should not be held and penalty be not imposed under section 15HB of the SEBI Act for the aforesaid alleged violations against the Noticee.
Adjudication Order in respect of Swan Securities Pvt Ltd in the matter of Swan Securities Pvt Ltd Page 4 of 16 (iii)Accordingly, we requested all the clients to return the cheques and passed appropriate rectification entry in the books of accounts. On considering good relationship in the past our clients obliged us by returning the cheques. (iv)Further, the client accounts were not settled subject to written confirmation of clients. Thus all pending 8 credit accounts were settled and we have complied with the said requirements.
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Source: SecMarx — sebi:JS/DJ/21/2017. 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.