sebi:Order/SR/PP/2019-20/5197/122
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Facts / Headnote
Adjudication proceedings disposed without imposing any monetary penalty
Provisions invoked
- s. 15
- s. 15H
- s. 15J
Regulations
- Reg. 7
- Reg. 6
- Reg. 9(f)
- Reg. 9
Parties
- Sunflower Broking Pvt. Ltd.
Holding
The Adjudicating Officer held the Noticee should have been more careful in complying with due skill, care and diligence obligations for client RJ-II's trades, but disposed of the proceedings initiated vide SCN dated May 14, 2019 without imposing any monetary penalty.
Full text
Adjudication Order in respect of Sunflower Broking Pvt. Ltd. in the matter of Sunflower Broking Pvt. Ltd. Page 2 of 10 CIR/MIRSD/16/2011 dated August 22, 2011. OD further observed that the Noticee has also failed to adopt the due diligence, care and caution during the course of its business as required in terms of clause A(2) of Code of Conduct specified under Schedule II read with Regulation 9(f) of SEBI (Stock Broker and Sub broker) Regulations, 1992 (hereinafter referred to as ‘Brokers Regulations’). A copy of inspection report along with the annexures was forwarded to Noticee for its comments/explanation. Based on the said inspection and after examination of Noticee’s explanations, OD initiated adjudication proceedings against the Noticee.
Adjudication Order in respect of Sunflower Broking Pvt. Ltd. in the matter of Sunflower Broking Pvt. Ltd. Page 3 of 10 received Rs. 10 lacs (Rs 5 lacs through cheque, which was encashed and another Rs 5 lacs through NEFT) on June 8, 2015, an amount which was far more than client's (RJ-II) known and declared income to the broker in his KYC. Further OD has observed that, SBPL on the first trading day entered into a bulk deal transaction in a "B" group scrip (Surana Solar). SBPL placed buy order for 2,50,000 shares of value Rs 1.39 crore and sell order for 2,35,000 shares of value Rs 1.31 crore. Again, on the next day buy orders for 2,56,000 shares for value of Rs. 1.37 crore were placed by SBPL. These bulk transaction in an illiquid or low volume scrip by a retail investor is an abnormal pattern. This should have triggered an enquiry from the broker and satisfying himself of the source of funds.
Adjudication Order in respect of Sunflower Broking Pvt. Ltd. in the matter of Sunflower Broking Pvt. Ltd. Page 4 of 10 Giving of high exposure beyond the financial strength and undertaking bulk deals in the very first transaction to a retail client casts serious doubt on part of SBPL's obligation to establish internal control and framing of risk management.
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Source: SecMarx — sebi:Order/SR/PP/2019-20/5197/122. 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.