sebi:RA/DPS/05/2015

SEBI · SEBI · 2014-12-23 · Rachna Anand, Adjudicating Officer / General Manager

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

Facts / Headnote

Penalty imposed on the Noticee for failure/delay in complying with SEBI Circular No. CIR/MRD/DMS/13/2010 dated April 23, 2010 and Clause 11 of the code of conduct specified under Third Schedule read with Regulation 20AA of DP Regulations.

Provisions invoked

• s. 15
• s. 15H
• s. 15J
• s. 19H
• s. 19G

Regulations

• Reg. 20A

Parties

• Jainam Share Consultants Pvt. Ltd.

Holding

The Noticee was found in violation of Clause 11 of the code of conduct specified under Third Schedule read with Regulation 20AA of DP Regulations and SEBI Circular No. CIR/MRD/DMS/13/2010 dated April 23, 2010, for delayed implementation of POA format for new clients and failure to update POA for existing clients, and a penalty of Rs. 5,00,000 was imposed under Section 15HB of the SEBI Act and Section 19G of the Depositories Act.

Full text

Page 2 of 11 of the SEBI Act and Rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as “Rules, 1995”) read with Section 19H of the Depositories Act, 1996 read with Rule-3 of the Depositories (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 2005 (hereinafter referred to as “Rules, 2005”) vide order dated December 23, 2014, to inquire into and adjudge under section 15HB of the SEBI Act and under section 19G of Depositories Act, 1996 for the aforesaid provisions of the DP Regulations.

Page 3 of 11 6. The key submissions in reply of the Noticee dated July 25, 2015 and in course of hearing towards the SCN, are being mentioned below;  The Noticee is, inter alia, SEBI Registered Depository Participant located as Surat& is acting as an agent and participant for the customers and is registered as a DP in CDSL.  The lapse in compliance of the provisions of the Circular and regulations of the SEBI and Depositories Act and Regulations made therein is not deliberate but it is a technical omission. The wordings of the circular were interpreted to mean that the same are voluntary in nature and only if the POAs taken were inconsistent with the guidelines in the said circular were to be changed. The Noticee has taken due care to comply with the regulations of the Circular once it was pointed out during the CDSL inspection.  The code of conduct and POA formats prescribed were assumed to be for guidance only and not to be compulsorily implemented. The Noticee hereby begs and interprets the point No. 6 of the SEBI Circular No. CIR/MRD/DMS/13/2010 dated April 23, 2010, that in case the existing POA is inconsistent with the POA prescribed by SEBI i.e. in case it was wider in scope and powers, only then the same had to be replaced with the new format.  In the case of the Noticee, the existing format and norms of POA were exhaustive and more stringent in compliance beyond the standardized norms prescribed by SEBI. The covenants of existing POA were in conformity with all t

Page 4 of 11  The intention of the Noticee of not using standardized norms for POA was not malafide and also it may be noted that there was no financial loss that has been caused to any investor due to such technical lapse of not using of standardized norms for POA.  Noticee respectfully prays and pleads that the proceedings initiated in the above notice be dropped since any action initiated against the Noticee would be disproportionate to the procedural lapse and shall irreversibly impact the business of the Noticee.

Source: SecMarx — sebi:RA/DPS/05/2015. 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.