sebi:WTM/KMA/ERO/IVD/169/11/2009
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Facts / Headnote
Warning issued to the stock broker; enquiry proceeding disposed of
Provisions invoked
- s. 19
Regulations
- Reg. 28
Parties
- Salasar Stock Broking Limited
Holding
Salasar Stock Broking Limited violated Clause A(5) of the Code of Conduct under Schedule II of the Broker Regulations by executing proprietary trades through A V Shares & Stock Brokers Private Limited, a broker of the same exchange (CSE), without obtaining prior permission from CSE as required under SEBI Circular dated January 13, 2004. The broker is warned and directed to strictly abide by laws, rules and regulations governing dealings in the securities market.
Full text
Page 2 of 7 subjected to investigation by SEBI to find out the possible violations of the provisions of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as SEBI Act) and the Regulations framed thereunder. The investigation conducted by SEBI revealed that there was unusual price variation in the shares of the company during the above period. The share price of the company had increased from Rs.1.25/- (on June 17, 2005) to Rs.15.10/- (on September 20, 2005). The period from March 1, 2005 to September 2005 was taken as the investigation period. It was noted that during the above period the shares of the company were also traded at Bombay Stock Exchange Limited (BSE) and the share price at BSE had gone up from Rs.2.99/- on March 30, 2005 to Rs.10.45/- on September 16, 2005. SEBI, inter alia, observed that three stock brokers namely, M/s Sanju Kabra, A V Shares & Stock Brokers Private Limited and Shivam Stock Broking Private Limited had traded substantially in the shares of the company during the investigation period and their cumulative trades accounted for 91% of the total volume of the company at CSE and that they had prima facie violated the provisions of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as the PFUTP Regulations) and Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 (hereinafter
Page 3 of 7 Brokers Private Limited. Its total trades involved 10,95,700 shares of the company (96% of the total volume of A V Shares & Stock Brokers Private Limited), which amounted to about 30% of the total trades at CSE in the shares of the company during the investigation period. The Broker executed the said transactions at an average purchase price of Rs.6.75/- and the said shares subsequently were sold at an average price of Rs.1.55/- (during the period June 9, 2005 to June 23, 2005). It was alleged that the Broker had prima facie violated Clause A(5) of the Code of Conduct for stock brokers specified under Schedule II of the Broker Regulations. In order to enquire into the alleged violations said to have been committed by the Broker, an Enquiry Officer was appointed by SEBI, vide order dated January 30, 2008 in terms of the provisions of the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (since repealed). Since, the aforesaid Regulations was repealed with effect from the notification of Securities and Exchange Board of India (Intermediaries) Regulations, 2008, the Designated Authority (hereinafter referred to as the Enquiry Officer), vide Report dated December 22, 2008 recommended to drop the proceedings initiated against the Broker for the reasons stated therein. It was found that the Broker had executed its own trades through another stock broker prima facie to avoid regulatory complian
Page 4 of 7 Broker further stated that all the sell transactions were done after the deactivation of its terminals. Thereafter, an opportunity of hearing was granted to the Broker on November 20, 2009. Mr. Kiran Kumar Sonthalia, Director of the Broker and Mr. Amit Sonthalia appeared before me on behalf of the Broker and submitted that the Broker had executed the impugned proprietary trades through A V Shares & Stock Brokers Private Limited, in compliance with SEBI Circular dated January 13, 2004. The case of the Broker was that its trades were squarely covered under the aforesaid circular. The learned representatives further submitted that, though, the Broker, vide letter dated February 17, 2005, had sought the permission of CSE, as required, no response was received from CSE. They further submitted that the Broker cannot be blamed for the inaction on the part of CSE.
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Source: SecMarx — sebi:WTM/KMA/ERO/IVD/169/11/2009. 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.