sebi:TCN/07/ID3/05-MAY/07

SEBI · SEBI · 2002-02-18 · Dr. T.C. Nair, Whole Time Member

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

Facts / Headnote

Censure imposed on Toss Financial Services Pvt. Ltd.

Provisions invoked

• s. 19

Regulations

• Reg. 7
• Reg. 4(b)
• Reg. 13(4)
• Reg. 13
• Reg. 26
• Reg. 200
• Reg. 21
• Reg. 23

Parties

• Toss Financial Services Pvt. Ltd.

Holding

Toss Financial Services Pvt. Ltd. was held to have failed to exercise due skill and care in violation of Clause A(2) of the Code of Conduct under Schedule II read with Regulation 7 of the Brokers Regulations, which enabled its clients to indulge in acts creating a false and misleading appearance of trading in the scrip of MHL in violation of Regulation 4(b) of the FUTP Regulations. A penalty of censure was imposed instead of the recommended two-month suspension of the certificate of registration.

Full text

1.9 During the course of investigation, it was observed that most of the clients trading in the scrip were linked to each other. It was observed fro trading pattern that these clients were involved in circular trading in the scrip. These clients have entered into buy and sell transactions wit other, squaring up positions and reversing trades either on the same day or during the same settlements, making the net receivable/deliv positions as either nil or shares of negligible quantities i.e about 100 to 200 shares. Thus, all the aforesaid clients had done transactions of fic nature, through different members of NSE and BSE and established /created artificial volumes in the scrip. 1.10 Toss Financial Services Pvt. Ltd. (hereinafter referred to as “Toss”) is a member of NSE. Investigations revealed that Toss had traded in the s MHL on behalf of M/s. Jem Fiscal Ltd., M/s. Prashant Investments and M/s. N. N. Investments from August 2000. All the aforesaid (masterminded by Jem Fiscals and Nazir Hakeem) have done transactions of fictitious nature through different members of NSE and BS established/created artificial volumes in the scrip thereby upsetting the market equilibrium industry.    2.0 Enquiry Proceedings 2.1 In view of the alleged irregularities committed by Toss, Chairman, SEBI vide order dated February 18, 2002 appointed an Enquiry Officer to e into the contravention/s alleged to have been committed by Toss while dealing the scrip of MHL. The Enquiry Officer issued a show

(h)               The clients were dealing in other scrips as well as such as Reliance Industries, TISCO and Morpen Laboratories. There was nothing the conduct of the clients. (i)                The clients promptly made payments and cleared their outstanding positions hence there was no occasion or any grievance with financial inability of the clients. (j)                All the transactions put through by Toss were on behalf of the clients and there was no proprietary trading in respect of MHL. The requiring margin money to be deposited did not arise because the clients were squaring up the position between the settlements and w clearing their dues. The issue about the initial margin money also did not arise having regard to the introduction made and the re volumes in which the clients were initially dealing.   (k)              There were no problems with respect to pay-in or delivery of shares as such there was no occasion to be suspicious of the dealings of th (l)                              Toss had no knowledge about any wrongful conduct of the clients and was not even aware whether Mr. Prashant Shah of M Investments and Mr. Narendra Navale of M/s. N N Investment were the employees of M/s. Jem Fiscal Ltd. Mr. Nazir Hakeem, Direc Fiscal Ltd had instructed Toss to accept instructions form Mr. Prashant Shah for the purpose of executing transactions in securities. Navale of M/s. N N Investment had instructed Toss to accept orders from Mr. Prashant Shah for the purpose of e

Sr. No Name of the client Purchase Sale Net Gross 1. M/s. Jem Fiscal 84, 200 84, 200 0 1, 68, 400 2. M/s. Prashant Investment 8, 200 8, 200 0 16, 400 3. M/s. N N Investment 1, 90, 000 1, 90, 600 -600 3, 80, 000

Source: SecMarx — sebi:TCN/07/ID3/05-MAY/07. 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.