sebi:PKB/AO-27/2009

SEBI · SEBI · 2007-07-19 · P. K. Bindlish, 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 of Rs. 2,00,000 imposed for violation of Clause A(2); not guilty of Clause B(2)

Provisions invoked

• s. 15
• s. 19
• s. 15H
• s. 15I
• s. 15J
• s. 15F

Regulations

• Reg. 7
• Reg. 199
• Reg. 26
• Reg. 26(v)

Parties

• VSE Stock Services Limited

Holding

VSE Stock Services Limited violated Clause A(2) of Code of Conduct r/w Regulation 7, Regulation 26(xvi), 26(xx) and is liable to Rs. 2,00,000 penalty under Section 15HB, but is not guilty of Clause B(2) / Section 15F(a).

Full text

Adjudication Order in respect of VSE Stock Services Ltd. Page 2 of 8 4/17/2009 (iv) noticee was doing netting at the sub-broker level i.e. credit of one client is being used for the other client’s pay-in. It has been also observed that few sub-brokers had not collected their clients’ obligation within stipulated time. It has also been alleged that the noticee were monitoring total exposure at the sub-broker level and not monitoring exposure at the client level.

Adjudication Order in respect of VSE Stock Services Ltd. Page 3 of 8 4/17/2009 fact that it is does not trade on its own but provides platform to the members of the parent body i.e. the recognized stock exchange, to trade. The noticee is only a facilitator and monitoring agency of its sub- brokers who are dealing with their clients and are responsible directly to the clients. The subsidiary company does not deal directly with their clients. The sub-brokers only deal with clients.

Adjudication Order in respect of VSE Stock Services Ltd. Page 4 of 8 4/17/2009 agreement. There was a hue and cry on this circular and even numerous cases were filed before various High Courts in the country. There was very little time given for implementing the new circular of the SEBI and it required completely new software. Hence, in the transitional time the securities which remained in the name of the broker (in the Designated Client Account), these Client Designated Accounts were used by the brokers for and on behalf of their clients till such time the new software was launched. The noticee submitted that this was a stop gap arrangement and has since been discontinued.

Source: SecMarx — sebi:PKB/AO-27/2009. 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.