sebi:QJA/MK/MIRSD/DOP/29630/2023-24

SEBI · SEBI · 2019-09-20 · Manoj Kumar, Executive Director

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

Facts / Headnote

Noticee held not to satisfy 'fit and proper person' criteria; appropriate measures ordered including restriction on taking up new clients in commodity segment for a specified period

Provisions invoked

• s. 19
• s. 11(4)
• s. 11B
• s. 27
• s. 12(3)
• s. 154
• s. 29A
• s. 131B
• s. 14A
• s. 131

Regulations

• Reg. 6
• Reg. 7
• Reg. 28
• Reg. 27
• Reg. 5(e)

Parties

• Kedia Capital Services Private Limited

Holding

The Noticee, Kedia Capital Services Private Limited, does not satisfy the 'fit and proper person' criteria specified in Schedule II of the SEBI (Intermediaries) Regulations, 2008, having facilitated trades in paired contracts (T+25) on NSEL in contravention of the conditions of the Exemption Notification dated June 05, 2007 under the FCRA.

Full text

Order in respect of Kedia Capital Services Private Limited Page 2 of 28 second Show Cause Notice dated September 20, 2019 along-with the copy of the letter dated December 30, 2014 of DEA, Ministry of Finance and a copy of the decision of the Hon’ble Bombay High Court dated August 22, 2014 in respect of paired contracts offered on the platform provided by the National Spot Exchange Limited (hereinafter referred to as the “NSEL”), was issued to the Noticee (hereinafter referred to as the “SCNs). The SCNs further advised the Noticee to submit its reply, if any, within 21 days of receipt of the said SCN. The Noticee filed its replies vide letters dated July 15, 2019 and October 21, 2019.

Order in respect of Kedia Capital Services Private Limited Page 3 of 28 was also advised to submit its reply to the Hearing Notice. On the scheduled date of hearing, the authorised representatives of the Noticee appeared on behalf of the Noticee in person and made submissions on the lines of the replies submitted earlier. During the course of hearing, certain queries were raised to the Noticee and the Noticee was granted time to submit response to the said queries along with the post hearing submissions, if any. Accordingly, the Noticee vide letter dated January 02, 2023 and email dated August 04, 2023 furnished its reply.

Order in respect of Kedia Capital Services Private Limited Page 4 of 28 e. That the Noticee executed T+25 contracts for 5 (five) clients out of which 3 (three) clients belong to the ‘family account’ and had 90% exposure. f. The aforesaid 5 (five) clients were: Mr. Rahul Kantari – ex employee of the Noticee; Mrs. Sunita Naresh Kedia – Noticee’s personal relation; Ratan Gold, Sarita and Shashi Soni – family account. g. That the trades in T+25 contracts were executed on instructions of the clients. h. That Noticee has not carried out any proprietary trades. i. That the observation of the Hon’ble Bombay High Court and the Economic Offense Wing (hereinafter referred to as the “EOW”) did not have a single instance stated that T+25 contracts were fixed income product. j. That Noticee had no intention to cheat clients or give any wrong advice or make revenues at the cost of client interest by going against their risk profile or risk appetite. k. That Noticee has not entered into any malpractice alleged in the SCNs. l. That cancelling the certificate of registration of the Noticee would lead to closure of 15 years old business as a stock broker, loss of jobs of 80 employees and 400 AP’s and more than 10,000 active clients. m. That in the last 15 years of existence of the Noticee, there has not been a single complaint by any of the client of the Noticee. n. That Noticee have more than 18,000 UCC.

Source: SecMarx — sebi:QJA/MK/MIRSD/DOP/29630/2023-24. 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.