sebi:MO/137/MIRSD/01/06

SEBI · SEBI · 2005-07-13 · 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

Censure imposed on the broker

Provisions invoked

• s. 19
• s. 12

Regulations

• Reg. 13(4)
• Reg. 5(1)
• Reg. 13(2)

Parties

• Bangalore Stock Exchange Financials Ltd.

Holding

The Whole Time Member censured M/s. Bangalore Stock Exchange Financials Ltd. for violations including dealing with unregistered sub-brokers, failure to obtain auditor's certificate for margin collection, permitting turnover limits above prescribed limits, and permitting use of BMC deposited with the promoting Stock Exchange for fixing gross exposure and turnover limits.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ ORDER UNDER REGULATION 13(4) OF SEBI (PROCEDURE FOR HOLDING ENQUIRY BY ENQUIRY OFFICER AND IMPOSING PENALTY) REGULATIONS, 2002, AGAINST BANGALORE STOCK EXCHANGE FINANCIALS LTD., MEMBER, THE STOCK EXCHANGE, MUMBAI AND NATIONAL STOCK EXCHANGE HAVING SEBI REGISTRATION NOs. INB011074136 AND INB231074130. 1.0             BACKGROUND

1.0 BACKGROUND 1.1 M/s. Bangalore Stock Exchange Financials Ltd. (hereinafter referred to as “the broker”) is a member of The Stock Exchange, Mumbai (“BSE”) and National Stock Exchange (“NSE”) registered with SEBI as a stock broker under section 12 of SEBI Act, 1992 with SEBI Registration No. INB011074136 and INB231074130. 1.2 Inspection of the books of accounts, documents and other records of the broker was carried out by SEBI for the period 21.10.99 to 17.3.02 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 August 22, 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 09.06.05 recommending for imposition of a minor penalty of censure on the broker. 2.2 A copy of the Enquiry Report was sent to the broker on 14.06.05, 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 13.07.05 and submitted that since all the observations/suggestions made in the inspection report have been ful

3.0 CONSIDERATION OF ISSUES 3.1 I have carefully considered the findings of inspection, Enquiry and the submissions made by the broker and my observations are as follows : a) Dealing with unregistered sub-brokers The broker activated the terminals of sub-brokers and allowed them to trade before receiving SEBI Registration Certificate. The broker submitted that the applications were taken personally to SEBI and in many cases registration numbers were allotted to sub-brokers and conveyed orally though actual certificates were printed at a later date. In most cases, the delay was 1 to 5 days. In two cases, there had been a delay of one month due to mix up of papers. The EO found that though in most cases, the registration had been completed, there was clear violation of the relevant provisions in three cases. b) Failure to obtain auditor’s certificate for collection of margins The broker submitted that margin certificates for the pending quarters were collected from the concerned sub-brokers in the form of self certificates. The EO found that self-attestation was not a substitute for Auditor’s certificate and hence the broker has violated SEBI Circular No.SMDRP/ Policy/Cir-6/2001 dated 1.2.2001. c) Anomalies with respect to contract notes It was alleged that contract notes were not signed by authorized signatories. The broker replied that now they are being signed by authorized persons. The EO found that the broker had rectified the defect subsequent to inspection.

Source: SecMarx — sebi:MO/137/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.