sebi:WTM/AB/IVD/ID10/12470/2021-22
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Facts / Headnote
Noticees found to have violated Clauses A(1)-(5) of the Code of Conduct for Stock Brokers and Regulation 4(1) & 4(2)(a) of PFUTP Regulations, 2003; however, no penalty imposed as recommended by DA (3-year prohibition on registering new clients) because Noticees are no longer registered stock brokers and MSEA has ceased to be a recognized stock exchange.
Provisions invoked
- s. 19
- s. 24
- s. 23
- s. 23H
- s. 12(3)
- s. 16(2)
- s. 2(27)
- s. 80J
- s. 10(27)
Regulations
- Reg. 7
- Reg. 4
- Reg. 5(1)
- Reg. 3
- Reg. 4(1)
- Reg. 13(1)
- Reg. 6
- Reg. 25
- Reg. 4(2)
- Reg. 27
- Reg. 26
- Reg. 28
- Reg. 28(1)
- Reg. 38
- Reg. 38(1)
Parties
- M/s. Rajat Shares & Stock Brokers Pvt Ltd
- M/s. Jhunjhunwala Binod & Co.
Holding
The Noticees were held liable for violating Clauses A(1)-(5) of the Code of Conduct for Stock Brokers and Regulation 4(1) & 4(2)(a) of the PFUTP Regulations, 2003 by executing circular/reversal trades on MSEA during a period when trading was not permitted. However, no penalty was imposed because the DA's recommended 3-year prohibition on registering new clients was rendered infeasible as the Noticees are no longer registered stock brokers and MSEA ceased to be a recognized stock exchange.
Full text
Order against M/s. Rajat Shares & Stock Brokers Pvt Ltd. and M/s. Jhunjhunwala Binod & Co. Page 2 of 28 (Regulation) Act, 1956 (hereinafter referred to “SCRA”). The SCNs forwarded therewith copies of an Enquiry Report dated August 31, 2020 (hereinafter referred to as “ER”) submitted by the Designated Authority (hereinafter referred to as “DA”) and called upon the Noticee nos. 1 and 2 to show cause as to why action as recommended by the DA or any other action including passing of appropriate other
Order against M/s. Rajat Shares & Stock Brokers Pvt Ltd. and M/s. Jhunjhunwala Binod & Co. Page 3 of 28 (ii) Trading shall commence only after setting up of Settlement Guarantee Fund or Trade Guarantee Fund, duly approved by SEBI. (iii) Payment of balance amount of Rs. 11,31,768/- on or before December 1, 2004 towards refundable financial support extended by SEBI to the Exchange. 2.2. MSEA failed to comply with the said conditions. It was however observed that some trades were conducted on the stock exchange with a turnover of Rs.13.26 lakhs in year 2003-04. Since, the turnover was very negligible, though the exchange was not legally permitted to conduct such trades on the exchange without complying with the conditions of renewal, MSEA was counseled and further renewal was granted for a period of one year vide Notification No. S.O. 1354 (E) dated December 6, 2004 commencing from 11th day of December 2004 and ending on December 10, 2005 subject to the conditions stated below: (i) The Exchange shall set up Settlement Guarantee Fund in compliance with SEBI Circular SMD/POLICY/SUB BROKER /Cir-12/97 dated June 09, 1997, after final approval by SEBI. (ii) Trading shall commence only after setting up of Settlement Guarantee Fund, duly approved by SEBI. (iii) The Exchange shall repay the balance amount of RS 7, 50,000/-(Seven Lakhs fifty thousand only) towards refundable financial support extended by SEBI to the Exchange. 2.3. MSEA did not comply with the aforesaid conditions and com
Order against M/s. Rajat Shares & Stock Brokers Pvt Ltd. and M/s. Jhunjhunwala Binod & Co. Page 4 of 28 Bhoruka Financial Services Ltd. (hereinafter referred to as “BFSL”) alone accounted for Rs. 89.28 crore or 99.13% of the total traded value of all the stocks. The remaining 19 scrips were traded between the two Noticees for their respective 'clients' for a value of Rs. 0.78 crore, constituting 0.87% of the traded value. It was alleged that all the trades (except in the scrip of Hindustan Liver Limited) executed by the Noticees as brokers on behalf of their clients and in their proprietary accounts were observed to be circular trades and reversal trades. 2.4. In view of the above, SEBI initiated enquiry proceedings against the Noticees, who at that time were stock brokers registered with SEBI and members of MSEA, under Regulation 5(1) of the SEBI (Procedure for Holding Enquiry by Enquiry Officer and imposing Penalty) Regulations, 2002 (hereinafter referred to as “Enquiry Regulations”) (Since Repealed) for alleged violation of the provisions of Section 19 of the Securities Contracts Regulation Act, 1956 (hereinafter referred to as the “SCRA”), Clauses A(1), A(2), A(3), A(4) and A(5) of the Code of Conduct for Stock Brokers specified under Schedule II of Regulation 7 of the SEBI (Stock Brokers) Regulations, 1992 (hereinafter referred to as the “Stock Broker Regulations”), Regulation 4(1) and 4(2)(a) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to
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Source: SecMarx — sebi:WTM/AB/IVD/ID10/12470/2021-22. 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.