sebi:WTM/GA/54/MIRSD/2/08
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Facts / Headnote
Minor penalty of censure imposed on the sub-broker
Provisions invoked
- s. 12
Regulations
- Reg. 13(4)
- Reg. 15
- Reg. 17
Parties
- M/s Chheda Shares and Securities
Holding
In exercise of powers under regulation 13(4) of the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002, the Whole Time Member imposed a minor penalty of censure on sub-broker M/s Chheda Shares and Securities (registration number INS 230534328).
Full text
Page 2 of 5 SEBI, vide order dated March 1, 2004 read with the subsequent order dated July 15, 2004 appointed an Enquiry Officer, under the provisions of Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (for short, Enquiry Regulations) to enquire into the alleged deficiencies / irregularities committed by the sub broker and which were observed during the course of inspection. The Enquiry Officer conducted the proceedings in terms of the Enquiry Regulations and vide report dated December 28, 2004 recommended for the cancellation of the certificate of registration of the sub broker.
Page 3 of 5 I note that the sub broker had given an explanation before the Enquiry Officer, that it could not produce the said documents as the software was not operational due to its failure to pay the maintenance charges. In terms of Regulations 15 read with Regulations 17 of Securities and Exchange Board of India (Stock Brokers and Sub – Brokers) Regulations, 1992 (hereinafter referred to as Broker Regulations), it is the duty of the sub broker to maintain inter alia the aforesaid documents and that he shall preserve the said documents for a minimum period of 5 years. I note that SEBI conducted the inspection during the period May 2003 – June 2003 and the period covered under the inspection was 2001-2002. Thus, the sub broker had failed to maintain and preserve the said documents even for two years. Therefore, it is fairly established that the sub broker violated the provisions of Regulations 15, 17 and 18 of the Broker Regulations. Admittedly, the sub broker had not entered into agreements as required under the SEBI circular dated May 21, 1997. The sub broker stated that most of its clients were family members or friends. The said explanation can not substitute the requirements specified under the said circular dated May 21, 1997. Further, the sub broker had also not maintained separate bank accounts for itself and the clients. Therefore, it is established that the sub broker has violated the provisions of the circular dated May 21, 1997.
Page 4 of 5 decision to close down the operations etc., it had decided not to apply for the grant of certificate of registration, through the said stock broker. The trades of the sub broker through the stock broker viz. Precious Stock Broking Services Ltd. was clearly in violation of the provisions of section 12 of Securities and Exchange Board of India Act, 1992 read with the then existing Rule 3 of Securities and Exchange Board of India (Stock Brokers and Sub – Brokers) Rules, 1992 and the SEBI circular dated May 21, 1997.
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Source: SecMarx — sebi:WTM/GA/54/MIRSD/2/08. 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.