sebi:MO/76/IVD/01/2007

SEBI · SEBI · 2006-04-27 · Dr. T. C. Nair, Whole Time Member

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Facts / Headnote

Interim direction restraining PRSSBL from opening fresh demat accounts vacated; no need to continue; all issues left open for Enquiry Officer

Provisions invoked

• s. 11
• s. 11(4)
• s. 19

Regulations

• Reg. 3

Parties

• M/s. Pravin Ratilal Share and Stock Limited

Holding

In exercise of powers under section 19 read with sections 11 and 11B of SEBI Act, 1992, SEBI directed that there is no need to continue the directions issued to PRSSBL not to open fresh demat accounts, with immediate effect.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ ORDER (UNDER SECTIONS 11 AND 11B OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992) 1.0 Background 1.1 Securities and Exchange Board of India (hereinafter referred to as “SEBI”) has issued, vide ad-interim ex-parte Order dated April 27, 2006 (here referred to as “the said Order”), certain interim directions against various market participants including M/s. Pravin Ratilal Share and Stock Limited (hereinafter referred to as “PRSSBL”) under Section 19, read with Sections 11, 11B and 11(4) of the SEBI Act, 1992 and Section 19 Depositories Act, 1996, pending enquiry and passing of final Order. 1.2 The said Order states that PRSSBL, Depository Participant (hereinafter referred to as “DP”) of National Services Depository Limited (here referred to as “NSDL”) prima facie appeared to have grossly failed in adhering to the “Know Your Client” (hereinafter referred to as “KYC”) laid down by SEBI, thereby facilitating opening of demat accounts in fictitious /benami names and cornering the retail portion of shares in Public Offerings (hereinafter referred to as “IPOs”). In view of the above preliminary findings, PRSSBL was directed not to open fresh accounts till further directions. 1.3 Para 17.18 of the said Order further states that the said Order shall be treated as show cause notice against the concerned entities named t including PRSSBL. These entities were given opportunity to file their objections, i

2.3 At para 8.3, it is stated that based on the information submitted by NSDL, out of 37,240 afferent accounts, 510 afferent accounts were hel PRSSBL. 2.4 In view of the above findings in the Order, directions as mentioned in Para 1.2 above were issued to PRSSBL. 3.0 Oral Hearing and Submissions of PRSSBL 3.1  PRSSBL, vide letter dated June 14, 2006, filed its preliminary submissions to the said ad-interim ex-parte Order after  availing the opportu inspect the documents relied upon by SEBI. The submissions interalia made by PRSSBL are as under: 3.1.1            PRSSBL vide letter dated May 03, 2006 has stated that all the demat accounts have been opened as per the Know Your Client N prescribed by SEBI. It has submitted that it was not guilty of any violation.

3.1.11  Since KYC norms is not a part of the Depository Act or the regulations, PRSSBL cannot be held guilty of having violated the provisio and or the Regulations.

Source: SecMarx — sebi:MO/76/IVD/01/2007. 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.