sebi:WTM/PS/27/IVD/ID-6/DEC/09
This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.
Facts / Headnote
Certificate of registration of sub-broker M/s Sunil Shares and Stocks Pvt. Ltd. suspended for 15 days
Provisions invoked
- s. 19
Regulations
- Reg. 4
- Reg. 7
- Reg. 5
- Reg. 15
- Reg. 28(2)
- Reg. 4(1)
- Reg. 38(2)
Parties
- M/s Sunil Shares and Stocks Pvt. Ltd.
Holding
The sub-broker SSS was found guilty of entering into circular/reversal trades creating artificial volume in KDIL shares in violation of Regulation 4(a), (b), (c) & (d) of the PFUTP Regulations, 1995 and Regulation 15 read with the Code of Conduct under the Brokers Regulations, and its certificate of registration was suspended for 15 days.
Full text
Page 2 of 10 broker of MPSESL viz. M/s. Sanjay Biyani (hereinafter referred to as ‘SB’), which created artificial volume in the shares of KDIL. SB had traded on its own account, while SSS had traded on behalf of its client Abhishek Khare (hereinafter referred to as AK).
Page 3 of 10 (i) Vide order dated September 14, 2009 the Adjudicating Officer has imposed a penalty of Rs.10,00,000/- on the same set of transactions. The present proceedings thus amount to ‘double jeopardy’, which is not permissible in law. (ii) The Enquiry Report violates the principles of natural justice. (iii) SSS did not know the names of counter brokers or clients. The orders were matched by the BOLT system. The Enquiry Officer has recorded that there is no apparent nexus between SB, SSS and AK. (iv) The Enquiry Officer has relied upon selective data. (v) The primary responsibility for monitoring transactions is of the stock exchanges. However, BSE never considered the spurt in price or volume of trading as unusual. (vi) The application of Regulation 7 of the Brokers Regulations is incorrect as SSS has acted as the sub-broker of MPSESL in the said trades. (vii) The transactions were carried out by AK on the terminal provided by SSS. AK had traded in several other scrips besides KDIL, and the transactions did not create any suspicion.
Page 4 of 10 (i) I note that SEBI Act empowers SEBI to initiate a single proceeding or a combination of proceedings like 11B, adjudication, enquiry, prosecution etc., as may be warranted to deal with the violations of the SEBI Act, Rules and Regulations made thereunder. These proceedings have different objectives. For example, adjudication penalizes the accused by way of monetary penalty whereas enquiry enables directions against registered intermediaries. I therefore do not find any illegality in SEBI initiating both enquiry and adjudication proceedings against the notice. (ii) It is noted that the proceedings have been conducted in adherence with the principles of natural justice and after affording the sub-broker a fair opportunity of hearing at all the stages before various enquiry officers. (iii) I note that there were reversal of trades / circular trades between SB and SSS. These trades were done by SB on his own account and SSS trading for its client Abhishek Khare. SB was buying and SSS was selling the shares of KDIL followed by reversals where SB was selling and SSS was buying almost the same quantity during the day. Such trading happened continuously for 32 trading days involving a total of 7,30,654 shares, as can be noticed as under. Date of transaction Buy qty. by SB as a client Sell qty. by SSS for AK Buy qty. by SSS for AK Sell by SB as a client 23.04.03 6000 6000 6000 6000 24.04.03 10000 10000 9900 9900 25.04.03 10000 10000 10000 10000 28.04.03 10000 10000 1000
You have read the preview. Create a free account to read the full order, track this party, and analyse it in Ontology.
Free accounts include 10 searches/day with full order access.
Source: SecMarx — sebi:WTM/PS/27/IVD/ID-6/DEC/09. 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.