sebi:MO/19/MIRSD/06/04

SEBI · SEBI · 2003-01-13 · A K BATRA, 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

Certificate of Registration No. INB 100965933 suspended for a period of 4 months, effective on expiry of 21 days from the date of the order.

Provisions invoked

• s. 19
• s. 16(2)

Regulations

• Reg. 13(2)
• Reg. 13(4)
• Reg. 6(1)
• Reg. 28(1)

Parties

• M/s DRB Securities Pvt. Ltd.

Holding

The Whole Time Member of SEBI suspended the Certificate of Registration No. INB 100965933 granted to M/s DRB Securities Pvt. Ltd. for a period of 4 months for multiple violations including failure to issue contract notes properly, unauthorized carry forward transactions, failure to report off-the-floor transactions, failure to maintain client registration forms, failure to segregate accounts, failure to make timely payments to clients, engaging in business other than securities, failure to collect margins, and failure to rectify bad deliveries in time.

Full text

Page 2 of 16 - Copies of contract notes acknowledged by clients were not maintained - Terms and conditions of the contract were not mentioned on the reverse of the contract notes - Contract notes for principal to principal trades were not issued in the proper format (b) Dealing as sub-broker of members of other stock exchanges, without obtaining registration as sub-broker from SEBI. (c) Dealing with unregistered sub brokers. (d) Entering into unauthorized carry forward transactions. (e) Not reporting off the floor transactions to the stock exchange (f) Not obtaining client registration forms. (g) Non maintenance of segregation between clients account and own account. (h) Engaging in business other than securities business. (i) Delay in making payments to clients. (j) Non collection of margin from clients. (k) Non maintenance of bad delivery registers. (l) Delay in payment of SEBI turnover fee. 1.3 The findings of the inspection were communicated to the said broker for soliciting their comments. Since the said comments were found to be unsatisfactory, an Enquiry Officer was appointed, to enquire into the alleged irregularities and violations committed by the said broker, vide

Page 3 of 16 2.1 The Enquiry Officer issued a show cause notice to the said broker on 26.12.2002, under Regulation 6(1) of the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to as the “Enquiry Regulations”). 2.2 The said broker submitted a reply to the notice, vide their letter dated 13.1.2003. However, they did not appear before the Enquiry Officer for the personal hearing, despite four opportunities being given to them by the Enquiry Officer. In view of the failure of the said broker to appear before the Enquiry Officer, the proceedings were concluded ex-parte’. 2.3 The Enquiry Officer submitted his report dated May 30, 2004 to SEBI, with the recommendation that a penalty of suspension of the certificate of registration of the broker, for a period of four months, may be imposed on the said broker. 3.0 SHOW CAUSE NOTICE AND HEARING 3.1 A show cause notice dated December 12, 2003 was issued to the said broker, under Regulation 13(2) of the Enquiry Regulations. They were advised to show cause as to why an appropriate penalty should not be imposed on them. The said broker was also advised that in terms of the provision contained in Regulation 13(2) ibid, Chairman or Member of SEBI Board was not bound by the recommendation of the Enquiry Officer and he may enhance the penalty, if so warranted. Considering the seriousness of violations found by the Enquiry Officer, the said broker was also called upon to show c

Page 4 of 16 3.2 The said broker made his submissions in response to the said show cause notice, vide his letter dated 27.12.03. 3.3 The said broker was also offered an opportunity to be heard in person, on January 23, 2004 and again on February 12, 2004. The said broker failed to appear for personal hearing on both the dates and also did not submit any reasons for non appearance. In view of the same, I find that a reasonable opportunity to make submissions in respect of the charges against him has been given to the said broker, but he has failed to utilize the same; hence I proceed in the matter, based on his reply to the show cause notice. 4.0 CONSIDERATION OF ISSUES 4.1 I have considered the inspection report, enquiry report, the reply of the said broker, and other material on record. My findings on the allegations made against the member-broker are as follows : 4.2 Irregularities with respect to issuance of contact notes 4.2.1 Regarding the absence of pre-printed serial numbers on the contract notes, the said broker has stated that although there were no pre-printed serial numbers, they did bear clearing-wise serial numbers. They also submitted that it was not practicable to have pre-printed serial numbers on continuous computer stationery. I find the reply of the said broker to be unsatisfactory; it is definitely possible to have pre-printed serial numbers on any kind of stationery and as far as clearing-wise serial numbers are concerned, they are not a substitute for pr

Source: SecMarx — sebi:MO/19/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.