sebi:MO/7/IVD/04/04
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Facts / Headnote
DKB found guilty of unbusinesslike conduct, failing to comply with statutory requirements, and violation of Code of Conduct clauses A(1) to (5); request for absolution rejected
Provisions invoked
- s. 19
Regulations
- Reg. 7
- Reg. 4
- Reg. 4(a)
- Reg. 4(d)
- Reg. 4(b)
- Reg. 4(c)
- Reg. 23
- Reg. 13(1)
Parties
- DKB Securities
Holding
DKB Securities was held guilty of unbusinesslike conduct under Bye law 357 of BSE and Rule 4 of NSE Rules for executing circular/fictitious trades financing KP entities, and of violating Clauses A(1) to (5) of the Code of Conduct. The defence that SEBI circular dated 14.09.1999 protected its conduct was rejected.
Full text
the aforesaid show cause. 2.1 DKB submitted its reply to the showcause vide its letter dated June 10, 2003. Subsequently, a opportunity of hearing was granted to it on August 06, 2003. Chamber of ZiaMody represented th DKB. Submissions of DKB in reply dated June 10, 2003 and in the oral hearing, are as follows :
demonstrate that there had been any pre-determination or content between DKB on the one hand and the counter party buying broker / client on the other hand while executing such trades. DKB also mentioned that the circular of SEBI dated 14.09.99 does not prohibit negotiated deals per se and it interpreted the circular to mean that negotiated trades are valid only if they are conducted like any other normal trades. According to DKB, when they entered into the relevant trades, they believed the same to be just like any other normal trade. DKB stated that it did not know that such trades were circular in nature. Further, DKB admitted that trades were executed by it as told by Mr. Kartik Parekh at a specific price quantity. However, it stated that it was not aware that scrips were being purchased by KPG entities. DKB submitted that the primary feature of the impersonal trading mechanism through screen based system does not permit the broker to know the identity of the buying client and therefore there was no fault on its part.
the money paid to KPG entities were strictly in accordance with the prevailing laws. Regarding the charge of aiding and abetting the creation of false market, DKB submitted that an essential ingredient for the same was ‘knowledge’ and the Enquiry Officer had not demonstrated any evidence to show that DKB had ‘knowledge’ about the creation of such false market. In the light of the above submissions, DKB requested for absolving them from the charges alleged by the Enquiry Officer in his report.
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Source: SecMarx — sebi:MO/7/IVD/04/04. 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.