sebi:WTM/GA/103/ISD/11/06

SEBI · SEBI · 2003-05-28 · G. Anantharaman, Whole Time Member

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Facts / Headnote

Minor penalty of censure imposed on certificate of registration

Provisions invoked

• s. 12

Regulations

• Reg. 13(4)
• Reg. 4
• Reg. 5(1)
• Reg. 13(2)
• Reg. 7
• Reg. 199

Parties

• M/s Marlecha Securities Private Limited

Holding

Minor penalty of censure was imposed on M/s Marlecha Securities Private Limited for failure to obtain complete client details, assess the financial worthiness of its client, and collect margin money before trading in Home Trade Ltd.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ ORDER AGAINST MARLECHA SECURITIES PRIVATE LIMITED, MEMBER, THE BANGALORE STOCK EXCHANGE LTD., UNDER REGULATION 13(4) OF SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING ENQUIRY BY ENQUIRY OFFICER AND IMPOSING PENALTY) REGULATIONS, 2002 FOR THE IRREGULAR TRANSACTIONS IN THE SHARES OF HOME TRADE LTD.  WTM/GA/103/ISD/11/06 1.0 BACKGROUND 1.1 M/s Marlecha Securities Private Limited  (hereinafter referred to as the Broker) is a member of the Bangalore Stock Exchange Ltd. (hereinafter referred to as BgSE) and is reg with the Securities and Exchange Board of India (hereinafter referred to as SEBI) as a stock broker under section 12 of Securities and Exchange Board of India Ac (hereinafter referred to as the said Act) with registration number INB 081009639. 1.2 The shares of Home Trade Ltd. (hereinafter referred to as HTL) were listed at Pune Stock Exchange Ltd. ( hereinafter referred to as PSE) on November 15, 1999 at Rs 250/- a BgSE on November 16, 1999 at Rs.275/-. There was a very sharp rise in the price of the shares of HTL both at PSE and BgSE and it reached Rs. 315/- within two weeks listing, i.e. by December 06, 1999. Thereafter, the price of the said shares reached Rs.874/- on May 05, 2000. The maximum rise in the price of the shares of HTL took between November 16, 1999 and March 31, 2000, when it moved from Rs.275/- to Rs.815/-. 1.3 SEBI conducted an investigation into the buying

1.0 BACKGROUND 1.1 M/s Marlecha Securities Private Limited (hereinafter referred to as the Broker) is a member of the Bangalore Stock Exchange Ltd. (hereinafter referred to as BgSE) and is registered with the Securities and Exchange Board of India (hereinafter referred to as SEBI) as a stock broker under section 12 of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the said Act) with registration number INB 081009639. 1.2 The shares of Home Trade Ltd. (hereinafter referred to as HTL) were listed at Pune Stock Exchange Ltd. ( hereinafter referred to as PSE) on November 15, 1999 at Rs 250/- and at BgSE on November 16, 1999 at Rs.275/-. There was a very sharp rise in the price of the shares of HTL both at PSE and BgSE and it reached Rs. 315/- within two weeks of its listing, i.e. by December 06, 1999. Thereafter, the price of the said shares reached Rs.874/- on May 05, 2000. The maximum rise in the price of the shares of HTL took place between November 16, 1999 and March 31, 2000, when it moved from Rs.275/- to Rs.815/-. 1.3 SEBI conducted an investigation into the buying, selling and dealings in the shares of HTL inter alia by the members of BgSE including the Broker for alleged circular trading and price manipulation thereby contravening the provisions of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 1995 ( hereinafter referred to as the FUTP Regulations) an

Gross Purchase (shares) % to the total buy volume at BgSE Gross Sales (shares) % to the total sell volume at BgSE April 01, 2000 to March 31, 2001 23,300 2.72% 23,300 2.72% 1.5 The investigation conducted by SEBI prima facie revealed that the Broker had resorted to circular trading with other members of BgSE, wherein the shares of HTL were traded amongst themselves, creating artificial volumes in the shares of HTL. It was also observed that the trades executed by the Broker along with other members of BgSE contributed more than 98% of the volume in the shares of HTL . 2.0 APPOINTMENT OF ENQUIRY OFFICER 2.1 SEBI appointed an Enquiry Officer, vide order dated May 28, 2003, under regulation 5(1) of Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to as the 2002 Regulations) to enquire into the alleged irregular transactions of the Broker in the shares of HTL. The following allegations were leveled against the Broker : "1) The client was not known to the broker and Mr Rajneesh, an employee of Home Trade was placing the orders on behalf of the client. The client registration form and member client agreement forms were not maintained. Financial worthiness and background of the client was not verified. Due care and diligence was not exercised in admitting the client. 2) The broker had actively traded in the scrip of HTL and resorted to circular trading with other members of BgSE whe

Source: SecMarx — sebi:WTM/GA/103/ISD/11/06. 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.