sebi:WTM/GA/100/ISD

SEBI · SEBI · 2004-11-22 · G. Anantharaman, Whole Time Member

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Facts / Headnote

Suspension of certificate of registration for a period of fifteen days

Regulations

• Reg. 13(4)
• Reg. 13(2)
• Reg. 7
• Reg. 3

Parties

• M/s Hexagon Capital Markets Ltd (INB 081008934), Member, Bangalore Stock Exchange Ltd

Holding

It was held that the Broker violated SEBI Circular dated April 11, 1997 and Clause A(2) of the Code of Conduct read with regulation 7 of the Broker Regulations, and a minor penalty of suspension of the certificate of registration for fifteen days was imposed on M/s Hexagon Capital Markets Ltd.

Full text

3.0 CONSIDERATION OF ISSUES AND FINDINGS. 3.1 Based upon the recommendation of the Enquiry Officer, a show cause notice dated November 22, 2004 was issued to the Broker under regulation 13(2) of the 2002 Regu asking him to show cause as to why the penalty as considered appropriate should not be imposed upon him. A copy of the Enquiry Report was also forwarded to the Broker w said show cause notice. 3.2 The Broker vide reply dated December 07, 2004 inter alia submitted that, the husband of client approached the Broker and expressed his willingness to trade in the shares of HT name of his wife. The said Shri Raju had also informed the Broker that he would be placing the orders on behalf of his wife. The Broker further stated that he had received t registration form duly attested and certified by the Manager, Standard Chartered Bank, Calcutta. The Broker also stated that he had informed the husband of the client orders would be executed only after the receipt of the full money (100%) in advance, either in the form of cheque or demand draft or through the banking channels. The contended that the member client agreement was sent to the client for signature. However, he had not received back the same from the said client. 3.3 It was also stated by the Broker that the quantity traded was very less and that he did not notice any volatility in the price movement in the shares of HTL. The Broker further su that his client used to trade in other shares like Silverline Industries, relian

3.12 The Broker submitted that the husband of his client (from Calcutta) was placing orders to trade in the shares of HTL. In this regard, the Broker could not produce any sat evidence to show that his client had given specific authorization in favour of her husband to trade on her behalf. In the facts and circumstances of the case, the transaction by the Broker in the shares of HTL, as per the instructions of a third party without any specific authorization from the client, will establish that the Broker had failed to exerc skill, care and diligence while trading on behalf of his client in the shares of HTL. Therefore, I hold that the Broker had violated the provisions of Clause A (2) specified in Sch of the Code of Conduct of the Broker Regulations. 3.13 In view of the above, it is fairly established the Broker had violated the SEBI Circulars dated April 11, 1997 , Clause A(2) of the Code of Conduct of Schedule III of the Regulations read with regulation 7 of the Broker Regulations and the above violations calls for a higher penalty than that recommended by the Enquiry Officer. 4.0 ORDER  In view of the foregoing, I, in exercise of powers conferred vide regulation 13(4) of (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulation hereby impose a minor penalty of suspension of the certificate of registration of M/s Hexagon Capital Markets Ltd (INB 081008934), Member, Bangalore Stock Exchange Lt period of fifteen days.

specific findings in respect of the violation of the provisions of FUTP Regulations, I deal with the other alleged violations attribute Broker. 3.7 The fact that the Broker had traded on behalf of his client in the shares of HTL substantially, is an undisputed fact. On a perusal of the trading details, it can be seen that the Bro executed various transactions on behalf of his client in the shares of HTL. It is an admitted fact that the Broker had not entered into the member client agreement as stipu terms of SEBI Circular dated April 11, 1997. In terms of the said circular, SEBI had developed a uniform format of the Client Registration Form and the Broker - Client Ag and further desired that the brokers might seek additional information, if any, so as to satisfy himself about the antecedents of his client and that it would be the responsibili stock brokers to provide for clients’ details as and when need arose. The Broker stated that as the client did not return the form (member client agreement) duly signed, he c enter into the member client agreement. In order to substantiate his claim, the Broker had furnished the copy of the letters dated June 15, 2001, June 19, 2001 and Octo 2001 (addressed by him to the client; seeking the demat account details of the client and the broker client agreement), before the Enquiry Officer. The copies of the said lette also submitted by the Broker during the course of hearing. 3.8 I note that, being an intermediary registered with SEBI, the

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