sebi:WTM/GA/90/ISD/09/06

SEBI · SEBI · 1997-02-11 · 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 certificate of registration

Provisions invoked

• s. 12

Regulations

• Reg. 13(4)
• Reg. 4
• Reg. 5(1)
• Reg. 13(2)
• Reg. 200
• Reg. 3
• Reg. 7
• Reg. 199
• Reg. 13(1)
• Reg. 17(1)
• Reg. 17(1)(i)

Parties

• M/s Sharad B Shah

Holding

SEBI imposed a minor penalty of censure on the certificate of registration of M/s Sharad B Shah, Member, Pune Stock Exchange Ltd., agreeing with the Enquiry Officer.

Full text

1.1 M/s Sharad B Shah (hereinafter referred to as the Broker) is a member of the Pune Stock Exchange Ltd. (hereinafter referred to as PSE) 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 Act) with registration number INB110239410. 1.2 The scrip of Home Trade Ltd. (hereinafter referred to as HTL) was listed at PSE on November 15, 1999 at Rs 250/- and at Bangalore Stock Exchange Ltd. (hereinafter referred to as BgSE) on November 16, 1999 at Rs.275/-. There was a very sharp rise in the price of the scrip of HTL both at PSE and BgSE. The price of the scrip of HTL at PSE reached Rs.315/ -within two weeks of its listing, i.e. by December 06, 1999. The subsequent rise in the price of the scrip of HTL is as detailed below: Date Price (Rs.) December 30, 1999 525.25 January 31, 2000 735.00 March 31, 2000 809.00 May 5, 2000 874.00

1.3 The maximum rise in the price of the scrip of HTL took place between November 16, 1999 and March 31, 2000, when it moved from Rs.275/- to Rs.815/-. 1.4 SEBI conducted an investigation under the provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations, 1995 (hereinafter referred to as FUTP Regulations) and SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 (hereinafter referred to as the Broker Regulations) into the buying, selling and dealings in the scrip of HTL inter alia by the members of PSE including the Broker for their involvement in the alleged circular trading, price manipulation etc. 1.5 Upon investigation, SEBI inter alia found that the Broker along with some other members of PSE had executed substantial trades in the scrip of HTL, wherein the shares were traded amongst themselves and thereby created artificial volume by executing trades which were not genuine. The said transactions had contributed for more than 90% of the volumes of trading in the said scrip at PSE. 1.6 The transaction details of the Broker on behalf of his sole client, Shri Sheo Shankar Pandey in the scrip of HTL at PSE are as follows: Period Gross purchase (shares) % to the total buy volume at PSE Gross Sales (shares) % to the total sell volume at PSE. April 01, 2001 to December 31, 2001 28,600 6.70% 24,900 5.83%

2.0 APPOINTMENT OF ENQUIRY OFFICER 2.1 On completion of investigations, SEBI appointed an Enquiry Officer vide order dated May 28, 2003 under regulation 5(1) of SEBI (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 scrip of HTL. 2.2 A show cause notice was issued to the Broker in which the following allegations were leveled against him: “1) The client was not known to the broker and the orders on behalf of the client was placed by Shri Rajsinghi. This is in violation of SEBI Circular No. SMD/ POLICY/IECG/1-97 dated 11.02.97. 2) The member client agreement was not obtained in violation of SEBI Circular No. SMD/POLICY/CIRCULAR/5-97 dated 11.04.1997. 3) Acknowledgement of the client on the counterfoil of the contract notes was not obtained which is in violation of Regulation 17(1)(i) of SEBI(SB & SB) Regulations, 1992. 4) It is alleged that the member had actively traded in the scrip of HTL and artificially created higher price and volumes in the scrip of HTL and entered into transactions that are not genuine trade transactions thereby contravening Regulation 4 (b) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 and violated Clause A(3) of the Code of Conduct as specified in Schedule II read with Regulation 7 of SEBI (SB&SB) Regulations 1992”. 2.3 Pursuant t

Source: SecMarx — sebi:WTM/GA/90/ISD/09/06. 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.