sebi:WTM/GA/34/ISD/11/05

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

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Minor penalty of 'censure' imposed on the broker

Provisions invoked

• s. 19
• s. 12

Regulations

• Reg. 13(4)
• Reg. 5(1)
• Reg. 13(2)
• Reg. 6
• Reg. 13(1)

Parties

• M/s Nereyeth Securities Private Limited

Holding

The broker was found to have violated the Code of Conduct for brokers under the SEBI (Stock Broker & Sub Broker) Regulations, 1992 by not exercising due skill, care and diligence while trading in the scrip of Home Trade Ltd., and a minor penalty of 'censure' was imposed.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ Order against Nareyeth Securiies Nov 30, 2005 | Orders : Orders of Chairman/Members SECURITIES AND EXCHANGE BOARD OF INDIA

1.1 M/s Nereyeth Securities Private Limited (hereinafter referred to as the ‘broker’) is a member of the Bangalore Stock Exchange (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 SEBI Act, 1992 having Registration Number INB 081009531. 1.2 The scrip of Home Trade Limited was listed in Bangalore Stock Exchange on 16.11.99 at Rs.275. The prices reached Rs.315 within two weeks i.e. by 6th December 1999. Thereafter, there was continuous sharp increase in the prices of the scrip as under: Date Price in Rupees December 30,1999 525.00 January 31,2000 735.00 March 31, 2000 809.00 April 10, 2000 825.25 May 5, 2000 874.00 The maximum rise in the price of the scrip was between 16th Nov 1999 and 31st March 2000 when the price moved from Rs.275 to Rs.815/-. 1.3 Investigation was conducted by SEBI into the buying, selling and dealings in the scrip of Home Trade Limited (hereinafter referred as ‘HTL’) by the members of BgSE and it was alleged that the broker had resorted to circular trading and price manipulation thereby contravening the provisions of SEBI (Stock Broker and Sub Broker) Regulations, 1992. It was also alleged that the broker had little knowledge of his client viz. Shri Deepak Chhabria which was against the concept of ‘Know Your Client’ as per the SEBI guidelines. 2.0 APPOINTMENT OF ENQUIRY OFFICER

3.   The maximum trade  done  by  the  client during the period under review in absolute monetary terms on a net daily position basis is less that Rs.50,000/- and the net amoun payable in a settlement was less than Rs.35000/-. Hence, according to the broker they were satisfied about the client’s ability to fulfill his commitments. The turnover o is therefore, not an apt reflection of his over trading or over exposure in the light of the above data. The broker has, therefore, claimed that it was incorrect to state that they had failed to assess the financial worthiness of the client.  The broker had also claimed undertaken continuous assessment of the client’s financial capabilities. The broker has further stated that the transactions of the clients executed through the broker w 200 to 300 shares and the transactions executed through the broker was either squared off, or resulted in delivery which were fully settled and there was no defaul From trades of such meagre quantity unless there is information to the contrary or material on record it was impossible to decipher any pattern or design. 4.0 CONSIDERATION OF THE ISSUES 4.1 I have carefully considered the findings of investigation and enquiry as also the submissions of the broker. I now find as under : 4.2                             As observed by the Hon’ble SAT in Madhukar Sheth Vs. SEBI (Appeal No.46/2002), “before executing series of transactions for the client, any prudent broker would bit far to ascertain the goings

Source: SecMarx — sebi:WTM/GA/34/ISD/11/05. 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.