sebi:MO/141/MIRSD/01/06

SEBI · SEBI · 2002-08-06 · 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

Provisions invoked

• s. 19
• s. 12

Regulations

• Reg. 13(4)
• Reg. 6
• Reg. 5(1)
• Reg. 13(2)

Parties

• M/s Lotus Investment & Securities

Holding

SEBI imposed the minor penalty of censure on M/s Lotus Investment & Securities (INB230660021), member of NSE, under Regulation 13(4) for irregularities observed during inspection for FY 2000-2001 and 2001-2002.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ Order against M/S.Lotus Investment & Securities Jan 24, 2006 | Orders : Orders of Chairman/Members MO/141/MIRSD/01/06 SECURITIES AND EXCHANGE BOARD OF INDIA

1.2 An Inspection of the Books of Accounts, Documents and other records maintained by the broker for the financial years 2000-2001 and 2001-2002, was carried out by M/s. Shankarlal Jain & Associates, Chartered Accountants appointed by SEBI vide letter no.SMD/DBA-1/Pre-Insp/AK/14877/2002 dated August 6, 2002. During the inspection, certain irregularities found to have been committed by the broker were observed. 2.0 ENQUIRY PROCEEDINGS 2.1 The Inspection Report was forwarded to the broker on completion of inspection. After considering the broker’s reply dated April 8, 2003 an Enquiry Officer was appointed vide Order dated December 16, 2003 under Regulation 5(1) of SEBI (Procedure for Holding enquiry by enquiry officer and imposing

4.0 CONSIDERATION OF ISSUES 4.1 I have carefully considered the findings of the Inspection, Enquiry and the submissions made by the broker and note significant points, as under : 4.2 a) Non-collection of margins With regard to the above allegation, the broker submitted that there had been no defaults in making payments or taking delivery of securities or furnishing securities in the case of sales. It also submitted that adequate margins were collected from the clients and only in some exceptional cases partial margins were collected for which penalty has already been imposed by NSE. The Enquiry Officer observed that there were incidents of margin shortage during the year 2000-2001 and the broker had yet to pay a margin of Rs.8,73,065 for a trade dated March 22, 2001 as observed by NSE. The Enquiry Officer found the explanation of the broker that the margins were retained by way of separate funds / shares /credit balances lying in their ledger not acceptable and the broker guilty. b) Using of multiple client identification As regards this charge, the broker submitted that the multiple client identification was used as per the requirement of its back office software which did not support multiple brokerage slabs for the same client code. The broker further submitted that these codes have been allotted prior to the SEBI circular dated July 18, 2001 to this effect and that subsequent to this circular, relevant modifications were made in the back office software and the system of

Source: SecMarx — sebi:MO/141/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.