sebi:WTM/KMA/ERO/IVD/282/07/2010
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Facts / Headnote
Suspension of certificate of registration of Ahilya Commercial Private Limited for a period of fifteen days for violations in the scrip of Bakra Pratisthan Limited, to run concurrently with three-week suspension imposed vide order dated July 8, 2010 in the matter of Offshore Finvest Limited.
Provisions invoked
- s. 19
Regulations
- Reg. 28(2)
- Reg. 4(2)(a)
Parties
- Ahilya Commercial Private Limited [Registration No. INB 031093439], Member, The Calcutta Stock Exchange Limited
Holding
The Broker was held guilty of contravening Regulations 4(2)(a), (e) and (o) of the PFUTP Regulations and Clauses A(1) to A(4) and B(4)(a) of the Broker Code of Conduct in respect of cross deals in Bakra Pratisthan Limited, and its certificate of registration was suspended for fifteen days.
Full text
Page 2 of 6 the shares of the company and their cumulative trades accounted for 85% of the total volumes in the said shares at CSE during the investigation period. It was alleged that the trades of the Broker were in contravention of Regulation 4(2)(a), (e) and (o) of the 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 Clauses A(1) to A(4) and B(4)(a) of the Code of Conduct specified for stock brokers under Schedule II of the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 (hereinafter referred to as the Broker Regulations).
Page 3 of 6 stated that it had already given its reply to the Enquiry Officer and further requested for a personal hearing. The Broker was given an opportunity of hearing on July 2, 2010 when Mr. Rajiv Choudhary, compliance officer of the Broker represented it and stated that the trades of the Broker were done as per the instruction of its clients.
Page 4 of 6 carried out the trades on behalf of its clients and that it had no manipulative intention while carrying out such instructions, would not absolve it of its involvement, in the facts and circumstances of the case. As stated above, the Broker had carried out cross deals involving substantial volume for a period of six months. The price of the scrip had also increased during such trades. As the Broker was placing orders for both the buyer and the seller, it cannot state that it was not aware of the nature of such trades. The price increase in the shares of the company was not supported by any fundamentals of the company. It was noted that for the years ended March 31, 2005, March 31, 2004 and March 31, 2003, the company had incurred loss (before tax) of Rs.0.51 lakh, Rs.0.66 lakh and Rs.0.17 lakh, respectively and that as on March 31, 2005, it had a negative Earning Per Share (EPS) of 0.05. In such a financial background, the share price of the company could not have increased but for the manipulation as had happened in the present case where the Broker was a necessary party. The very fact that the Broker had traded substantially in the shares of the company which was otherwise illiquid would establish that it had indulged in an act which had created false and misleading appearance of trading in the securities. From the facts and circumstances of the case, it is obvious that the object of the Broker was to manipulate the price and order matching mechanism. Further, i
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Source: SecMarx — sebi:WTM/KMA/ERO/IVD/282/07/2010. 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.