sebi:WTM/AB/NRO/MIRSD/6519/2019-20
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Facts / Headnote
Confirmed interim order dated October 11, 2019 against Noticee nos. 1, 2, 3, 4, 5, 6, 9, 10, 11, 12, 13 and 14 till further orders; revoked directions against Noticee nos. 7 and 8
Provisions invoked
- s. 19
Regulations
- Reg. 35
Parties
- Noticee no. 1 - Fairwealth Securities Ltd.
- Noticee no. 2 - Dhirender Gaba
- Noticee no. 3 - Naveen Gaba
- Noticee no. 4
- Noticee no. 5
- Noticee no. 6
- Noticee no. 7
- Noticee no. 8
- Noticee no. 9
- Noticee no. 10
- Noticee no. 11
- Noticee no. 12
- Noticee no. 13
- Noticee no. 14
Holding
The interim directions dated October 11, 2019 are confirmed against Noticee nos. 1, 2, 3, 4, 5, 6, 9, 10, 11, 12, 13 and 14 till further orders, and the directions against Noticee nos. 7 and 8 are revoked.
Full text
Confirmatory Order in the matter of Fairwealth Securities Ltd. Page 2 of 24 hearing was also granted to them on November 15, 2019. On the said date of hearing Noticee no. 4,5,6,7,8,12 and 14 were heard. Noticee no. 2 and 3 had sought for an adjournment on medical grounds. Accordingly, matter was adjourned to December 2, 2019, on which date, Noticee no. 1,2,3,9, 10,11 and 13, were
Confirmatory Order in the matter of Fairwealth Securities Ltd. Page 3 of 24 no other option left with the broker to fulfill its obligations towards both its clients and the exchanges to avoid any instances of default. b. The cease and desist order against the Noticees have effectively resulted in the entire business of the Fairwealth Group brought at a standstill. This has resulted in non-fulfilment of the various obligations to the exchange and/or clients of Fairwealth Comodity Broking Pvt. Ltd. (‘FCBL”). The Noticee submits that the cease and desist order issued against them should be vacated and the Noticees should be allowed to operate their commodity business which is being carried out through FCBL. The Noticees submit that there are no violation of any SEBI rules, regulations and circulars in FCBL. c. Similarly, with regard to the NBFC activity carried out through Fairwealth Financial Services Ltd. (‘FFSL’), since the Gabas are the promoters and directors of FFSL, the cease and desist order is indirectly applicable to FFSL as well. d. With regard to para 2 read with para 6A & para 6B of the interim order, it is submitted that there are following discrepancies: i. The total value of client securities as mentioned to be sold from the five client accounts in para 2 is said to be Rs. 82.15 crore, however, in the table at page 6 of the interim order after point 6B, the total value of securities so sold from the accounts of five clients is Rs. 73.30 Crores i. It is submitted
Confirmatory Order in the matter of Fairwealth Securities Ltd. Page 4 of 24 In view of the aforesaid discrepancies, the Noticees submit that the implementation of the present order should be quashed till the investigation in the present matter is complete. e. In the meantime, the Noticee be allowed to operates its business so as to enable them to earn some profits so as to be in position to repay the obligations towards its clients. While proposing the aforesaid, the Noticee submits that whatever was done by the Noticees was done to fulfill the operational losses in lieu of the ever increasing interest burden, so as to ensure that there is no default in its obligation towards the clients and Exchanges. f. Here the Noticees would once again like to stress that they have not siphoned off the funds which would have been generated from the sale of securities. All the funds which was generated was ploughed back into the securities to meet the day to day obligation towards the Exchanges and its clients. In this regard it is submitted that no payout is given to the five clients from whose accounts the securities were sold and, if any, payout was ever given the same was once again the ploughed back into FSL to meet its obligations. g. Furthermore, the Noticees submit that they have sold and/ or mortgaged / pledged all their assets so as to enable them to invest in FSL, so as to meet the ever increasing interest burden and the resultant operational losses. h. With regard to the relati
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Source: SecMarx — sebi:WTM/AB/NRO/MIRSD/6519/2019-20. 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.