sebi:MO/179/IVD/02/2006

SEBI · SEBI · 2000-10-19 · 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

Debarred 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) and (d) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 by indulging in structured and cross deals in the scrip of Vision Organics Ltd, and was debarred from accessing the securities market for two months.

Full text

public offer and the buying, selling and dealing in the scrip of Vision Organics Ltd (hereinafter referred to as VOL). M/s. Vinay Capital Pvt. Ltd (hereinafter referred to as Vinay Capital) was one of the entities traded in the scrip of VOL. 1.2 VOL had come out with an Initial Public Offer (IPO) of 43.50 lakh shares of Rs.10/- each at a premium of Rs.30/- per share which opened for subscription on October 19, 2000. The investigation revealed that as the company was not able to get the issue fully subscribed, it, through Shri Dilip Thakkar, the then director of VOL, approached one Shri Ketan Shah and family to subscribe to the issue with an understanding that the shares allotted will be repurchased with a commission by VOL. 1.3 The investigation further revealed that the price of the scrip for the period July 09, 2001 to November 09, 2001 hovered between Rs. 82 to Rs. 132. The following pattern of price movement during the investigation period was observed: July 19, 2001 to July 31, 2001: price moved from Rs 124 to Rs 84 August 01, 2001 to August 10, 2001: price moved from Rs 76.55 to Rs125 August 24,2001 to September 10, 2001: price moved from Rs132 to Rs. 85.05 September 11, 2001 to September 26, 2001: price moved from Rs. 88.75 to Rs.

1.5 The investigation further revealed that 63 cross deals (62 deals in the BE segment and 1 deal on the EQ segment) and 77 structured deals (74 deals in the BE segment and 3 deals on the EQ segment) had been done between selected groups of Trading Members having some common clients or promoters who are also linked with VOL. The cross deals were executed at a variation from the Last Traded Price (LTP) in the range of (5.53%) to 5.79%. The structured deals were executed at a variation from LTP in the range of (1.24%) to 5.20%. 1.6 Investigation further revealed that Vinay Capital dealt in the scrip of VOL through H Nyalchand Financial Services Ltd., member of NSE and VSE Securities Ltd., member BSE (hereinafter referred to as Nyalchand and VSE) and they also hold 49% stake in SDFC Securities Ltd. (hereinafter referred to as SDFC) Shri Rahul Shah, director of Vinay Capital Ltd. is also director of SDFC Securities Ltd. Nyalchand Financial Services is a corporate trading member on the capital market segment of the Exchange. On perusal of the details of transactions by H. Nyalchand Financial Services, it was seen that Vinay Capital had transacted in the scrip of VOL during the period March 13, 2001 to November 09, 2001. The transactions done on behalf of Vinay Capital were squared up in the same settlement leading to a net nil delivery position for the scrip as shown below: SN Segment & Period SN Start Date SN End Date Client Name Buy Qty. Sell Qty. Client Gross Qty. Mkt. Gross Qt

Vinay Capital Ltd. 2001144 BE- Account 5- Nov-01 9- Nov-01 Vinay Capital Ltd. 14075 14075 28150 1037444 2.71 0 15084 0.00 1.7 The investigation further revealed that the Trading member H Nyalchand Financial Services had entered into a number of structured deals with the broker SDFC Securities Limited. It was observed that there were 20 structured deals executed between the above two TM amounting to 30940 shares constituting 0.72% to the overall market gross quantity on the BE Segment for the period under scrutiny. Vinay Capital was 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). The following is the summary of the structured deals executed by H. Nyalchand Financial Services: SDFC Securities Ltd. and H. Nyalchand Financial Services Ltd.

Source: SecMarx — sebi:MO/179/IVD/02/2006. 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.