sebi:Order/VV/AA/2021-22/13183

SEBI · SEBI · 2020-11-17 · Vijayant Kumar Verma, Adjudicating Officer

Reviewed by Varun Matlani, Advocate — Securities Lawyer practicing in SAT and SEBI

Provisions invoked

Regulations relied on

Parties

Holding

The excerpt does not contain a final holding; SEBI frames issues on whether Parwati Capital violated NSE Colocation Guidelines and Point 2(a) of Chapter V of NSE Bye-Laws, PFUTP Regulations 3(b), 3(c), 3(d) and 4(1) read with Sections 12A(a)-(c) of the SEBI Act, and Code of Conduct Clauses A(2) and A(5), and whether penalties under Sections 15HA/15HB and Regulations 26(xvi)/26(xx) apply.

Full text

Page 2 of 28 2. SEBI initiated adjudication proceedings under Sections 15HA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the “SEBI Act”) and Section 15HB of the SEBI Act read with Regulations 26(xvi) and 26(xx) of SEBI (Stock Brokers & Sub Brokers) Regulations, 1992 (hereinafter referred to as “Stock Broker Regulations”) against the Noticee. Adjudication proceedings have been initiated against the Noticee for the alleged violation of provisions of point 2(a) of Chapter V of NSE bye-laws read with clauses A(2) and A(5) of the Code of Conduct specified under Schedule II read with regulation 9(f) of the Stock Broker Regulations and regulations 3(b), 3(c), 3(d) and 4(1) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as “PFUTP Regulations”) and Sections 12A(a), 12A(b) & 12A(c) of the SEBI Act.

Page 3 of 28 (a) Based on review of logs, Parwati connected on to the secondary server for 389 trading days in CD/IRF segment, 263 trading days in CM segment and 104 trading days in FO segment during the review period, the details of which are given below: Number of days IKM connected to the secondary server across the review period: Year 2010 2011 2012 2013 2014 Total Number of trading days connected to the secondary server in CD / IRF segment - - 83 244 62 389 Number of trading days connected to the secondary server in CM segment - - - 58 205 263 Number of trading days connected to the secondary server in FO segment - - - 47 57 104 (b) Based on review of logs, Parwati connected only to secondary server (i.e. no connections made to primary server) for 9 trading days in CM segment and 8 trading days in CD/IRF segment during the review period. Number of days Parwati connected to the secondary server without connecting to the primary server across the review period: Year 2010 2011 2012 2013 2014 Total Number of trading days connected to the secondary server in CD / IRF segment - - 4 1 3 8 Number of trading days connected to the secondary server in CM segment - - - - 9 9 (c) Parwati was reprimanded by NSE on May 4, 2012 through email (Annexure 2) sent to Parwati’s 4 email ids (md@parwaticapital.com, dp@parwaticapital.com, support@parwaticapital.com and pawanbagri@parwaticapital.com) for connection to secondary server of CD segment using IP 10.230.8.106 asking the member to rever

Page 4 of 28 Thereafter, from August 31, 2012 till the introduction of MTBT in the CD segment in April 7, 2014, Parwati connected to the secondary server on 384 out of 400 trading days, i.e., 96% of the trading days. Thus, Parwati did not pay heed to the NSE reprimand dated May 4, 2012, and continued to connect to the secondary server. Below mentioned is the year wise details of the same: ” Number of days Parwati connected to the secondary server post reprimand in either of the segments: Year 2010 2011 2012 2013 2014 Total Number of trading days connected to the secondary server in either of the segment - - 82 244 206 532 (d) It was observed that Parwati in its statement recorded during investigation on May 3, 2019 stated that it had not received any warning / reprimand email from NSE for connection to secondary server. It was observed that NSE confirmed that it had not received any delivery failure notice from any of the 4 email Ids to which it had sent the aforesaid emails. (e) Parwati connected first to secondary server on 81 trading days in CM segment and 253 trading days in CD/ IRF segment during the review period. Below mentioned is the year wise breakup of the same: Number of trading days when Parwati connected first to secondary server: Year 2010 2011 2012 2013 2014 Total Number of trading days connected first to secondary server in CD/IRF segment - - 56 148 49 253 Number of trading days connected first to secondary server in CM segment - - - 9 72 81 (f) Point 2 (a) o

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