sebi:WTM/RKA/ERO/68/2012
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Facts / Headnote
Warning issued to the noticee under regulation 28(2) of the SEBI (Intermediaries) Regulations, 2008, with a direction to strictly comply with securities laws.
Provisions invoked
- s. 19
Regulations
- Reg. 7
- Reg. 4(2)
- Reg. 200
- Reg. 28
- Reg. 27
- Reg. 28(1)
Parties
- Mr. Ashok Kumar Kayan (Registration No. INB 030491111), Member, the Calcutta Stock Exchange Limited
Holding
The noticee, a stock broker, was found to have violated regulation 7 read with Clause A(2) of the Code of Conduct (Schedule II of the Stock Brokers Regulations) by failing to act with due skill, care and diligence in executing cross deals in an illiquid scrip with weak fundamentals, and a warning was issued.
Full text
Page 2 of 4 5. Based on the above investigations vide order dated February 18, 2007, read with subsequent orders dated November 19, 2007 and November 18, 2009, SEBI appointed an Enquiry Officer/Designated Authority ('DA'), under the provisions of SEBI(Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (since repealed) read with SEBI(Intermediaries) Regulations, 2008 (hereinafter referred to as 'the Intermediaries Regulations'), to enquire into the aforesaid alleged violations by the noticee.
Page 3 of 4 done on orders received from the clients and have resulted in solely brokerage income as evident from books of accounts of the noticee ii. The Calcutta Stock Exchange is functioning with a handful of members. It is an "illiquid exchange" with turnover in selected companies concentrated among few brokers, in scrips quoted exclusively on the CSE. In this background "matching" of trades and "turnover concentration" become natural and cannot be extrapolated into "synchronized trading" or any sort of illegal practices. iii. The noticee had transacted in the scrip based on the instructions of clients, and therefore, cannot be held liable for any influence of price / volume in the scrip. There was no squaring off transaction. A stock broker cannot be held responsible for the transactions of its clients unless it is established that the broker is aware of the intentions of the clients. Referring to the order of SAT in Kasat Securities Pvt. Ltd. vs. SEBI wherein tribunal has held that even if synchronization of trades is established, the same is not sufficient to hold that the broker is in violation of any regulation or liable to any penalty unless there is material record to establish that he was aware of the same. It is submitted by the broker that they are not aware that any trades have the potential to be circular / synchronized in nature. It was submitted that merely because they have traded on behalf of the clients in the scrip, during the investigation period, it ca
Page 4 of 4 for the years ended March 31 2005, March 31, 2004 and March 31, 2003 the Company incurred loss (before tax) of `0.51 lakh, `0.66 lakh and `0.17 lakh, respectively. As on March 31, 2005, the Company had negative earnings per share (EPS) of 0.05. Thus, the Company was continuously in losses, which does not justify such sharp increase in the price of the scrip.
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Source: SecMarx — sebi:WTM/RKA/ERO/68/2012. 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.