sebi:PKK/AO/165/2010

SEBI · SEBI · 1993-11-18 · P K Kuriachen, Adjudicating Officer

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Facts / Headnote

Violation found; penalty imposed

Provisions invoked

• s. 15A
• s. 15
• s. 15J
• s. 15I

Regulations

• Reg. 18
• Reg. 26

Parties

• M/s. Prashant J Patel

Holding

The Noticee violated Regulations 18, 18B, 26(i), 26(ii), 26(iii), 26(xi), 26(xiv), 26(xix) and 26(xx) of the Brokers Regulations and the SEBI Circulars, attracting penalty under Sections 15A(c) and 15HB of the SEBI Act. A total monetary penalty of Rs 2,00,000 was imposed on M/s. Prashant J Patel.

Full text

Page 2 of 10 Noticee to inquire into and adjudge the alleged violations of Regulations 18, 18B, 21, 26(i), 26(ii), 26(iii), 26(xi), 26(xiv), 26(xix) and 26(xx) of SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 (hereinafter referred to as ‘Brokers Regulations’) and SEBI Circular no. SMD/SED/CIR/93/23321 dated November 18, 1993, SMD/RCG/Cir (BKG) 293/95 dated March 14, 1995, SMD/Policy/Cir1-97 dated February 11, 1997, SMD/Policy/Cir3-97 dated March 31, 1997, SMD/Policy/Cir5-97 dated April 11, 1997, SMDRPD/Ploicy/Cir- 32/1999 dated September 14, 1999, SMDRPD/Ploicy/Cir-6/2001 dated February 01, 2001, SMDRPD/Policy/Cir-9/2001 dated July 18, 2001, SMDRPD/Policy/Cir-49/2001 dated October 22, 2001 and SMD/Policy/Cir-12/2002 dated May 17, 2002, (hereinafter referred to as SEBI Circulars) u/s 15A(c) and 15HB of SEBI Act.

Page 3 of 10 Notice, Reply & Personal Hearing 4. The AO issued a Notice bearing no. EAD/GBR/102134/2007 dated August 24, 2007 (hereinafter referred to as ‘SCN’) to the Noticee in terms of the provisions of Rule 4 of the Adjudicating Rules requiring it to show cause as to why an inquiry should not be held against it for the alleged violations. It was alleged in the SCN that (a) Noticee dealt with unregistered sub-brokers viz. M/s. V. S. S. Securities and M/s. Aatash Investments. (b) The Noticee failed to preserve the contract notes of the trades executed through the dealers at Bangalore and Mumbai Office. Certain discrepancies were also noted in the copies of the contract notes maintained at the Noticee’s office. (c) Several discrepancies were noted in the client registration forms and client agreements maintained by the Noticee. (d) Failed to collect adequate margins from clients. (e) Certain discrepancies were found in the Unique Client Codes maintained by the Noticee. (f) Extended unauthorized usage of trading terminals to M/s. Taurus Stock Broking Pvt. Ltd. (g) Entered into off market transaction of huge volumes. (h) Noticee failed to cooperate with the inspection team and did not provide documents sought for the purpose of the inspection.

Page 4 of 10 6. In the absence of any submissions made by the Noticee, considering the facts available on record, it was decided to conduct an inquiry in the matter. The AO has granted an opportunity of personal hearing to the Noticee and advised it to appear before the AO on October 17, 2008. The Hearing Notice dated October 07, 2008 was sent by hand delivery and duly received by the Noticee. However, the hearing was adjourned. The undersigned granted an opportunity of personal hearing vide letter dated October 04, 2010 advising the Noticee to appear before me on October 22, 2010. The Noticee through its authorised representative Mr. Neelesh Patel appeared before me on the said date. Noticee at the time of hearing submitted that it had not submitted any reply to the SCN since they didn’t have adequate staff. The Noticee vide letter dated October 22, 2010 forwarded a copy of their letter apparently submitted in response to the hearing notice dated October 07, 2008 wherein which they inter alia stated the following; (a) All the observations and discrepancies pointed out in the inspection report were noted by it and would ensure that such error will not be repeated in the future. (b) All contract notes have been stored at the warehouse and that they had sent the contract notes to all the clients. They noted all the discrepancies and that they are issuing the contract notes in the prescribed format. (c) The discrepancies in the client registration forms have been noted and that

Source: SecMarx — sebi:PKK/AO/165/2010. 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.