sebi:WTM/KMA/IVD/390/06/2011
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Facts / Headnote
Enquiry proceedings disposed without any penalty
Regulations
- Reg. 4(a)
- Reg. 28(2)
Parties
- Macy Securities Private Limited
Holding
The enquiry proceedings against Macy Securities Private Limited in the matter of Balaji Industrial Corporation Limited were disposed without any penalty, with no finding of guilt for contravention of Clause A(2) of the Code of Conduct.
Full text
Page 2 of 4 higher price ranging from `0.50 to `18.10 compared to the last traded price on 77 days for 36,900 shares which resulted in 222 trades. For 208 out of these trades, the buy orders were placed first. During the second period, Smruthi Agro Farms Private Limited bought 877 shares and Kyvalya Agro Farms Private Limited bought 16 shares through the stock broker which represented 8.40% of the traded quantity. In view of its transactions, it was alleged that the stock broker had violated Regulation 4(a) and 4(b) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 1995 (hereinafter referred to as the PFUTP Regulations) and Clauses A(1) to A(5) of the Code of Conduct for the stock brokers specified in Schedule II of the Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 (hereinafter referred to as the Stock Brokers Regulations). The designated authority in his Report (hereinafter referred to as the Enquiry Report) dated February 9, 2011 found that the violation of Regulation 4(a) and (b) of the PFUTP Regulations and Clauses A(1), (3), (4) and (5) of the Code of Conduct for stock brokers specified in the Stock Brokers Regulations were not established. The Designated Authority while finding that that stock broker had violated Clause A(2) of the Code of Conduct for stock brokers specified in the Stock Brokers Regulations, recommended that a warn
Page 3 of 4 based on the instructions of its clients. With regard to the allegation of the contravention of Clause A(2), it is stated by the stock broker that it had exercised due skill, care and diligence in the context of its business and that it had obtained proper Know Your Client (KYC) form from its clients, as stipulated. It further stated that it had executed requisite agreements with its clients and that for the trades executed for the aforesaid clients, it had taken proper margin too. The stock broker further stated that all its transactions on behalf of the said clients were executed in good faith and in consonance with the Rules and Regulations of SEBI and the Stock Exchange. Further, actual delivery of shares was also carried out. According to the stock broker, no penalty can be levied against it for the alleged violations. Thereafter, an opportunity of hearing was granted to the stock broker on April 7, 2011, wherein Mr. Mahesh Chain Khubchandani, Whole Time Director of the stock broker appeared before me and reiterated the submissions made by the stock broker in its letter dated March 12, 2000.
Page 4 of 4 vide an Order dated June 2, 2011 and the said clients were given a benefit of doubt for the reasons stated therein. The Designated Authority also concluded that no violation of the PFUTP Regulations and other provisions of the Code of Conduct could be established. It was also observed by the Designated Authority that there was no sufficient proof on record to conclusively establish the collusion between the stock broker and its clients for manipulating the scrip. It is the submission of the stock broker that it had complied with all the rules and regulations of SEBI and the stock exchange, obtained KYC Form, executed proper agreements, collected proper margin and delivered the shares. Further, the transactions executed by the aforesaid clients (for which the stock broker is now charged with) were given a benefit of doubt. In view of the foregoing, in the interest of justice it would not be appropriate to find the stock broker guilty of contravening Clause A(2) of the Code of Conduct specified for stock brokers under the Stock Brokers Regulations. Considering the case in its totality, I dispose of the present enquiry proceedings as ordered herein below.
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Source: SecMarx — sebi:WTM/KMA/IVD/390/06/2011. 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.