sebi:ORDER/JS/RJ/2025-26/31547

SEBI · SEBI · 2009-11-06 · Jai Sebastian, Adjudicating Officer

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Penalty imposed on Noticee under section 15HB of the SEBI Act

Provisions invoked

• s. 15
• s. 15H
• s. 15J

Regulations

• Reg. 6
• Reg. 13
• Reg. 9(f)
• Reg. 26
• Reg. 9(b)

Parties

• Sunflower Broking Private Limited

Holding

The Noticee violated regulation 26(xix) and clauses A(1) and A(2) of Schedule II read with regulation 9(f) of the Stock Broker Regulations (misuse of AP's trading terminal allotted to Mrs. Ila Sangani), regulation 9(b) read with NSE Circular dated June 02, 2023 (common directors and fund-based activities with twelve entities), but did not violate regulation 26(xix) and clauses A(1) and A(2) read with regulation 9(f) in respect of the seven terminals, nor the SEBI Circular dated November 06, 2009 and related NSE Circulars regarding receipt of funds from clients. A penalty of Rs. 2,00,000/- was imposed under section 15HB of the SEBI Act.

Full text

Adjudication Order in the matter of Sunflower Broking Private Limited Page 2 of 33 (d) SEBI Circular No. MIRSD/DR-1/Cir-16/09 dated November 06, 2009 (hereinafter referred to as ‘SEBI Circular dated November 06, 2009’); (e) Regulation 9(b) of the Stock Broker Regulations read with NSE Circular No. NSE/INSP/42448 dated October 18, 2019 (hereinafter referred to as ‘NSE Circular dated October 18, 2019’) and NSE Circular No. NSE/COMP/48536 dated June 09, 2021 (hereinafter referred to as ‘NSE Circular dated June 09, 2021’); and (f) Regulation 9(b) of the Stock Broker Regulations read with NSE Circular No. NSE/INSP/6938 dated December 09, 2005 (hereinafter referred to as ‘NSE Circular December 09, 2005’) and NSE Circular No. NSE/INSP/56947 dated June 02, 2023 (hereinafter referred to as ‘NSE Circular dated June 02, 2023’).

Adjudication Order in the matter of Sunflower Broking Private Limited Page 3 of 33 terminals. The AP also submitted in its reply that said seven entities were its employees (i.e., terminals were allotted to its employees only). (b) In this regard, AP was advised to provide complete details with regard to the employment of the said seven entities with AP, including copies of the offer letter, relevant date(s) of employment, attendance details, proof of payment of salary, proof of income tax deduction and proof of PF payment. In response to the same, the AP, vide email dated January 19, 2024, provided only a one-page appointment letter pertaining to six out of the said seven entities (to whom the terminal was allotted). On perusal of said one page letters, it was found that the said letters were vague and ambiguous. It was observed that the address of the candidate, terms and conditions of the appointment, etc., were absent in the letter. It was, further, observed that no other details like relevant dates of appointment, attendance details, etc., were provided in spite of specific advice being given to the AP to provide the same. Further, it was observed that no details were provided in respect of one entity. (c) In this context, Post Inspection Analysis Report(hereinafter referred to as ‘PIA’) alleged that the AP had not maintained any records (apart from a single page appointment letter) relating to the relationship with the persons to whom the terminals were allotted. It was

Adjudication Order in the matter of Sunflower Broking Private Limited Page 4 of 33 the said person on April 26, 2021, i.e., two years prior to the purported appointment letter. (f) In response, the Noticee, inter alia, stated as under: “Ila Sangani was initially appointed in March, 21 via reference from one trusted source of the Director. As mentioned in above paragraph that Roof One was operated with very minimal staff, Roof One faced heavy shortage of staff during covid period and during said time, we got Ila’s reference and management hired her so that basic operations of the company do not get affected. As everyone was working from home, required joining formalities were not done. In Apr,21 & May,21 there was heavy spread of novel covid pandemic situation and she got affected with covid and went on leave and re-joined the company again in 2023.” (g) It is stated in the PIA that the terminal was active during the period when Ms. Ilaben Sangani was on leave. It was mentioned that there were several trades executed using her terminal in her absence. In this regard, PIA stated that, as there is no clear indication regarding the usage of the terminal allotted to Ms.Ilaben Sangani by herself, it is not incorrect to assume that there had been a misuse of the terminal. (h) In view of the above, the Noticee was alleged to have violated regulation 26(xix) and Clauses A(1) and A(2) of Schedule II for Code of Conduct read with regulation 9(f) of the Stock Broker Regulations. Dealing

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