sebi:MO/14/MIRSD/06/04
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Facts / Headnote
Warning
Regulations
- Reg. 13
- Reg. 14
Parties
- M/s J M Morgan Stanley Retail Services Pvt. Ltd.
Holding
The Whole Time Member rejected the Enquiry Officer's recommendation of three months suspension of registration and instead warned M/s J M Morgan Stanley Retail Services Pvt. Ltd. to be more diligent in future regarding its capital market activities.
Full text
Page 2 of 13 ii. Contract notes did not bear pre-printed serial numbers. The numbers were generated through computer software. iii. Acknowledgements were not obtained on the duplicates of the contract notes. The contract notes of the outstation clients were being sent through courier. iv. No contract notes were issued for “vyaj badla” transactions. v. Duplicate copies of bills issued to clients for vyaj badla transactions were not being maintained. 2.1.2 Proper segregation was not being maintained between member’s own account and clients’ accounts. 2.1.3 Client registration forms were not available with respect to some clients. 2.1.4 In some instances, there was delay in giving deliveries to the clients. 2.2 Upon the conclusion of the enquiry proceedings, the enquiry officer submitted his report dated September 11, 2003, in which he recommended a minor
Page 3 of 13 contravened any of the provisions of law as alleged in the show cause notice and further submitted that they had always complied with and/or substantially complied with the requirements of law. In addition, they also referred to a few instances in the past in which SEBI had taken a lenient stand in a similar set of circumstances.
Page 4 of 13 undertake vyaj badla transactions. It was stated that a vyaj badla transaction was essentially a financing transaction, in which the vyaj badla Investor-client (“Investor-client”) entered into an agreement with the member-broker with a view to deploy funds in vyaj badla transactions, through the member-broker, in accordance with the market demand for funds, and thus earned returns on the transaction called the badla return. An Investor-client is therefore, neither a purchaser nor a seller of securities in the stock market, but his role is akin to that of a lender/borrower of securities under the Securities and Exchange Board of India approved Securities Lending and Borrowing Scheme.. In a Vyaj Badla Transaction, the investor-client deposits funds with the member- broker, to be utilized by the member-broker in vyaj badla transactions. The Member-broker, acting on behalf of the Investor-client, steps in only where a third party purchaser of securities, prior to the settlement date, finds himself short of funds. In such a scenario, the member broker lends money on settlement date, on behalf of the third party purchaser, in order to enable the purchaser to carry forward his transaction to the next settlement date. In these kind of transactions, the investor client who deposited the funds with the member broker neither intends to acquire/purchase the shares being funded nor does he acquire ownership of the shares at any time in the transaction. The member broker, acti
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Source: SecMarx — sebi:MO/14/MIRSD/06/04. 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.