sebi:WTM/GA/163/ERO/3/07

SEBI · SEBI · 2001-08-01 · G. Anantharaman, Whole Time Member

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Facts / Headnote

Major penalty imposed: certificate of registration of Bubna Stock Broking Services Ltd. suspended for a period of twelve months, effective on expiry of 21 days from the date of the order.

Provisions invoked

• s. 19

Regulations

• Reg. 7
• Reg. 4
• Reg. 13(4)
• Reg. 13
• Reg. 3
• Reg. 4(a)
• Reg. 5(1)
• Reg. 2

Parties

• Bubna Stock Broking Services Ltd. (Registration no. INB030707632)

Holding

The Whole Time Member held that Bubna Stock Broking Services Ltd. violated Regulation 4(a) and 4(b) of the FUTP Regulations and clauses A(1), A(2) and A(4) of the Code of Conduct under Schedule II of the Broker Regulations by executing cross deals that created artificial volume and price in the shares of Patriot Trading Company Ltd., and imposed a major penalty of twelve months' suspension of its certificate of registration.

Full text

Page 2 of 24 1.1 The price of the shares of Patriot Trading Company Ltd. (hereinafter referred to as the company) increased from Rs. 2.30/- per share on August 01, 2001 to Rs. 62.16/- on February 15, 2002 at the Calcutta Stock Exchange Association Limited (hereinafter referred to as CSE), the stock exchange where the shares of the company were listed. Further, the price of the shares of the said company showed a downward trend and reached Rs.27.05/- on February 28, 2002. 1.2 In view of the unusual price movements noticed in the shares of the company, Securities and Exchange Board of India (hereinafter referred to as SEBI) conducted an investigation in respect of buying, selling and dealing in the shares of the company and to enquire into whether the said company, other intermediaries/persons associated with the said buying, selling and dealing in the shares of the company contravened inter alia the provisions of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 (hereinafter referred to as the FUTP Regulations), Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 (hereinafter referred to as the Broker Regulations), Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations,1997, (hereinafter referred to as the ‘Takeover Regulations’). 1.3 The investigation conducted by SEBI found that certain members of CSE n

Page 3 of 24 Bubna Stock Broking Services Ltd. is hereinafter referred to as the Broker. 1.4 It was found that the Broker had executed trades for 26,71,500 ( both buy and sale) shares of the company on behalf of its various clients out of the total turnover of 78,68,302 shares at CSE. The said trades accounted for 34% of the total turnover in the shares of the company at CSE. Investigation revealed that out of the aforesaid trades of the Broker 25,33,100 shares were transacted by way of cross deals which constituted for 95 % of the Broker’s trading volume in the shares of the company. It was also found that most of the transactions of the Broker were in the nature of matching and synchronized trades where both buy and sell orders of identical quantity and price were entered in its own terminal. 1.5 The trades executed by the Broker in the shares of the company at CSE are given below: DATE SELL QTY SELL RATE (Rs) SELL VALUE (Rs) BUY QTY BUY RATE (Rs) BUY VALUE (Rs) 05-Nov-01 300 10.00 3000.00 0

Page 4 of 24 DATE SELL QTY SELL RATE (Rs) SELL VALUE (Rs) BUY QTY BUY RATE (Rs) BUY VALUE (Rs) 20-Dec-01 64500 37.09 2392500.00 64500 37.09 2392500.00 21-Dec-01 68600 37.75 2589700.00 68600 37.75 2589700.00 24-Dec-01 55000 40.92 2250500.00 55000 40.92 2250500.00 26-Dec-01 30000 40.10 1203000.00 30000 40.10 1203000.00 26-Dec-01 81050 40.47 3279995.00 81050 40.47 3279995.00 27-Dec-01 9500 42.63 405000.00 9500 42.63 405000.00 28-Dec-01 8000 45.60 364800.00 8000 45.60 364800.00 31-Dec-01 4000 54.70 218800.00 4000 54.70 218800.00 02-Jan-02 30000 55.00 1650000.00 30000 55.00 1650000.00 03-Jan-02 1000 44.10 44100.00 1000 44.10 44100.00 04-Jan-02 62000 43.61 2704000.00 62000 43.61 2704000.00 07-Jan-02 66000 41.86 2763000.00 66000 41.86 2763000.00 09-Jan-02 40000 45.50 1820000.00 40000 45.50 1820000.00 11-Jan-02 37000 46.34 1714500.00 37000 46.34 1714500.00 14-Jan-02 1200 52.75 63300.00 1200 52.75 63300.00 15-Jan-02 19500 46.03 897500.00 19500 46.03 897500.00 16-Jan-02 30000 41.00 1230000.00 30000 41.00 1230000.00 17-Jan-02 15400 45.00 693000.00 15400 45.00 693000.00 21-Jan-02 12000 41.00 492000.00 12000 41.00 492000.00 22-Jan-02 30000 39.00 1170000.00 30000 39.00 1170000.00 24-Jan-02 30000 40.00 1200000.00 30000 40.00 1200000.00 28-Jan-02 41000 36.73 1506000.00 41000 36.73 1506000.00 29-Jan-02 57000 41.49 2365000.00 57000 41.49 2365000.00 30-Jan-02 10000 48.00 480000.00 10000 48.00 480000.00 01-Feb-02 35000 46.14 1615000.00 35000 46.14 1615000.00 04-Feb-02 82500 52.38 4321250.00 8250

Source: SecMarx — sebi:WTM/GA/163/ERO/3/07. 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.