sebi:MO/59/IVD/08/04

SEBI · SEBI · 2003-10-15 · 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 of Patani Securities Pvt. Ltd. suspended for six months, effective on expiry of three weeks from the date of the order.

Provisions invoked

• s. 11B
• s. 19

Regulations

• Reg. 7
• Reg. 13(4)
• Reg. 11
• Reg. 13(2)
• Reg. 4(b)

Parties

• Patani Securities Pvt. Ltd.

Holding

Patani Securities Pvt. Ltd. was held to have violated Regulation 4(b) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 and Clauses A(2) and A(4) of the Code of Conduct under Regulation 7 of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, and its certificate of registration was suspended for six months.

Full text

1. The shares of M/s Vakrangee Software Ltd. (hereinafter referred to as ‘VSL’) are listed for trading on the Stock Exchange, Mumbai (hereinafter referred to as ‘BSE’). On receipt of complaints alleging price manipulation in the scrip of VSL by Shri Harshad Mehta, in connivance with certain entities, SEBI conducted an investigation into the dealings in the shares of VSL.

Relating to Securities Market) Regulations, 1995. Patani has not exercised due diligence and care and has disturbed the equilibrium of the true price discovery mechanism in the price of the scrip of VSL. Patani is guilty of violation of Clause A(2) and A(4) of Code of Conduct specified in Schedule II, compliance of which is mandatory in terms of Regulation 7 of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992.” In view of his findings, the E.O recommended that the registration of Patani as a broker of The Stock Exchange, Mumbai, be suspended for a period of 6 months. SHOW CAUSE NOTICE AND REPLY

10. Regarding the allegation that their orders were placed on the BOLT system at the very beginning of each trading day, Patani stated that the transactions in question were between the period from December 11, 1999 to February 14, 2000 and that during the said period, there were many other scrips in which, the circuit of 8% was imposed, where orders of huge quantities were placed at 9.55.00 and 9.55.59 i.e. just before the beginning of the trading hour. Details of such scrips also were given. They said that they were not aware as to what action was taken by SEBI in respect of the other scrips. They also pointed out that placing orders on behalf of the client either in huge quantity or in the beginning of the trading hour was legal and proper. They also said that no motives can be attributed to them as they have not committed any misconduct nor have they traded a single share on their own behalf. It was further said that all the market obligations arising out of the trade have been honoured by their clients and there was not a single case of default or outstanding position in the market. They submitted that the report of the Enquiry Officer was erroneous and that the Show Cause Notice issued should be discharged.

Source: SecMarx — sebi:MO/59/IVD/08/04. 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.