sebi:MO/106/MIRSD/01/06

SEBI · SEBI · 2005-03-04 · Madhukar, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Warning imposed on the broker under Section 19 of the SEBI Act, 1992 read with Regulation 13(4) of the SEBI (Procedure for Holding Enquiry) Regulations, 2002

Provisions invoked

• s. 19
• s. 12

Regulations

• Reg. 5(1)
• Reg. 13(2)
• Reg. 13(4)

Parties

• M/s. Latin Manharlal Securities Pvt. Ltd.

Holding

The broker was found guilty of two violations — dealing with unregistered sub-brokers and granting a trading terminal to an unregistered sub-broker's office — and was warned to be more cautious in future and to adhere to the SEBI Act and Rules and Regulations made thereunder.

Full text

1.1 M/s. Latin Manharlal Securities Pvt. Ltd. (hereinafter referred to as “the broker”) is a member of The Stock Exchange, Mumbai (“BSE”) registered with SEBI as a stock broker under section 12 of SEBI Act, 1992 with SEBI Registration No. INB011072056. 1.2 Inspection of the books of accounts, documents and other records of the broker was carried out by SEBI for the period April 2000 to September 2002 and certain irregularities found to have been committed by the broker were observed. 2.0 ENQUIRY PROCEEDINGS 2.1 In view of the above, an Enquiry Officer (EO) was appointed vide SEBI Order dated December 16, 2003 under Regulation 5(1) of SEBI (Procedure for Holding Enquiry) Regulations, 2002 (hereinafter referred to as the “said Regulations”) to inquire into the irregularities observed during the inspection of books of accounts of the broker. The EO after conducting the enquiry in terms of the said regulations submitted his report on 15.02.05 recommending for imposition of a minor penalty of warning on the broker. 2.2 A copy of the Enquiry Report was sent to the broker on 23.02.05, in terms of Regulation 13(2) of the said Regulations, advising it to show cause as to why appropriate penalty including the penalty as recommended by the Enquiry Officer should not be imposed. 2.3 The broker replied vide letter dated 04.03.05 and submitted that the penalty of warning has been recommended only for two lapses which are technical in nature. The broker submitted that they would strictly fo

3.0 CONSIDERATION OF ISSUES 3.1 I have carefully considered the findings of inspection, Enquiry and the submissions made by the broker. Though the inspection report lists a number of violations alleged to have been committed by the broker, the EO has found the broker guilty of two violations, as under : a) The broker dealt with unregistered sub-brokers The broker submitted that it had stopped doing business with Kanyaka Shares w.e.f. 28.9.02 and for Tirthraj Securities Pvt. Ltd., it had sent an application for registration as sub-broker on 23.7.02 and on 9.8.02 but the same was received back. Subsequently, the application was granted and M/s. Tirthraj Securities is its registered sub-broker. The EO found that the broker had made hasty move to deal with unregistered broker and it should have waited till the concerned entity got proper registration certificate from SEBI. When asked by the EO as to why the broker could not wait till the allotment of proper registration, the broker accepted its lapse and submitted that the same had been done inadvertently without having any vicious intention. The EO found the broker guilty of the said charge. b) Granting of trading terminals to client The broker stated that it had stopped doing business with Kanyaka Shares w.e.f 28.9.02. The terminals can only be located at the registered office/ branch office and at registered sub-broker offices of the broker. The EO found that though the broker would have stopped dealing with Kanyaka Shares, hi

3.2 With regard to other charges like not maintaining the statutory books, delay in making payment and delivery of securities to clients, acknowledgement not obtained on few duplicate contract notes, non-maintenance and deficiencies in maintenance of client database and non-collection of margins, the EO, after considering the submissions of the broker, did not find the broker guilty of violation of any Rules. 4.0 On a careful perusal of the charges, findings of inspection and enquiry and the

Source: SecMarx — sebi:MO/106/MIRSD/01/06. 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.