sebi:MO/179/IVD/

SEBI · SEBI · 2004-09-29 · 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

Debar Vinay Capital Limited from accessing the securities market for a period of two months with immediate effect

Provisions invoked

• s. 11B
• s. 11(4)
• s. 19

Regulations

• Reg. 11
• Reg. 4
• Reg. 4(d)

Parties

• Vinay Capital Limited

Holding

Vinay Capital Limited was found guilty of violating Regulation 4(a), (b), (c), (d) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 by indulging in structured and cross deals, and was debarred from accessing the securities market for a period of two months.

Full text

SN Date From Date To Segment Buy TM Sell TM No of Trades Avg Trd Price Trd Qty % to mkt gross for the SN % to mkt gross for the period H Nyalchand Financial Services Ltd 2001143 29-Oct-01 2-Nov-01 BE-Account H Nyalchand Financial Services Ltd SDFC Securities Ltd 2 96.73 5500 0.76 0.13 2001144 5-Nov-01 9-Nov-01 BE-Account H Nyalchand Financial Services Ltd SDFC Securities Ltd 1 118.50 125 0.01 0.00 Total 20 30940 0.72 1.8 From the above, the investigation has found that Vinay Capital by executing structured cross and synchronized deals has violated the provisions of Regulation 4 (a), (b), (c) an Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995. 2.0 SHOW CAUSE NOTICE, REPLY AND THE OPPORTUNITY OF PERSONAL HEARING. 2.1 Accordingly, a show cause notice dated September 29, 2004 was issued to Vinay Capital advising it to show cause as to why suitable directions under regulation 11 of SEBI (Pro of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 read with Section 11(4) (b) and 11B of the SEBI Act, 1992 including a direction to it from dealings in securities for a particular duration should not be passed against it. 2.2 Vide letter dated November 05, 2004 Vinay Capital forwarded its reply to the said Show Cause Notice, submitting interalia as under: a) It is a limited company and as per the shareholding pattern of the company already on record Shri Ketan

3.4 I further find that the Trading member had entered into a number of structured deals with the broker SDFC Securities Limited and there were 20 structured deals executed betw Trading Members amounting to 30940 shares constituting 0.72% to the overall market gross quantity on the BE Segment for the period under scrutiny.  I find that Vinay Cap the major client of the Nyalchand Financial Services Ltd and associated to the SDFC Securities Ltd. and Ketan Shah & Co (client of SDFC Securities Ltd). 3.5 With regard to the submission that the term ‘structured deals’ has not even been defined under SEBI Act, Rules or Regulations made there under it needs to be noted that the te connotes the meaning which any person, more so, who is dealing in the securities market should know. Hence, I consider it as a laboured argument. However, I have obser number of such deals are not numerous and I have taken a note accordingly. 3.6  Thus, from the foregoing discussion, I find Vinay Capital Limited by indulging in the structured and cross deals as discussed above has been guilty of violating the provi Regulation 4 (a), (b), (c), (d) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 199 read as under:

the orders in the online system itself even if the buyer and seller are willing to tr market price outside the system and when such orders are entered in the online system at the market price and at the last traded price the same are considered as structu so in either case, Vinay Capital is squeezed between devil and deep sea. g) With reference to the allegation that transactions done on behalf of Vinay Capital were squared up in the same settlement leading to a nil delivery position for the sc submitted that the transactions do not per se amounts to violation of Regulation 4(d). It is equally necessary to show the intention was to artificially inflate, depress fluctuations in the market price of securities. h) It was again submitted that Vinay Capital was already holding shares which were allotted to it during the public issue and as an investor it is perfectly legitimate to hedge it through jobbing. The total gross volume during the period was 22,15740 over 4 settlement comprising of 20 days and its gross volume was 109150 that is 5.54% of volume which is not significant enough to influence any movement in the price. It is not that it was trading in the scrip without having any delivery and hence, the conclusio is totally erroneous. It was further submitted that Vinay Capital has not indulged in any fraudulent activity nor it has committed any fraud. It has not made any unfair gain transactions have resulted into any loss to the investors. 2.3 In adherence to the Principles

Source: SecMarx — sebi:MO/179/IVD/. 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.