sebi:WTM/RKA/IVD/ID-2/49/2012

SEBI · SEBI · 2011-09-17 · Rajeev Kumar Agarwal, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Confirmed

Provisions invoked

• s. 19
• s. 23D

Regulations

• Reg. 26

Parties

• Grishma Securities Private Limited
• Mr. Ketan C. Shah
• Mr. Chandrika H. Gandhi
• Mr. Chhabil C. Shah
• Mr. Mihir Ghelani

Holding

The ad interim ex-parte directions dated December 28, 2011 prohibiting Grishma Securities Private Limited, its directors and CEO from buying, selling or dealing in the securities market are confirmed and shall remain in force till further directions.

Full text

Page 2 of 8 2. On noticing a steep fall in the share price of TPL on the first day of trading/listing, SEBI conducted an investigation into the same. It was prima facie observed that TPL had made several mis-statements relating to Inter-Corporate Deposits ("ICDs"), placement of purchase orders, etc in the offer document. Further, it was observed that six entities, namely, Mr. Jivraj Zala, Ms. Lopa Saumil Bhavanagari (Ms. Lopa), Pinac Stock Brokers Private Limited, Swift Tie Up Private Limited, Salasar Stock Broking Private Limited and Todi Securities Private Limited, had provided exit to some IPO allottees (retail allottees and QIBs) of their shares allotted in the IPO, on the first day of trading/listing. Since the aforesaid 6 persons/entities sold the shares so purchased from the IPO allottees at a price lesser than their purchase price, they incurred substantial losses. Such huge losses were found to be partly offset through the funds received through layered transactions from TPL. Mr. Jivraj Zala had sustained maximum losses to the tune of ₹9.95 crore (₹3,20,38,993 on BSE and ₹6,74,68,589 on NSE) and this loss was partly offset (to the tune of ₹3.8 crore) by funds from TPL routed through an entity, M/s. Bellisima Impex (which had received ₹10.36 crore from TPL). Mr. Jivraj Zala had traded through his stock broker, Grishma Securities Private Limited (hereinafter referred to as "Grishma") in the shares of TPL on the listing day. Grishma is a trading member of the Bombay Sto

Page 3 of 8 loss making trades of Mr. Jivraj Zala. The investigation also observed that part of the funds transferred into the account of Mr. Jivraj Zala for the purpose of trading in the shares of TPL also came from two other clients of Grishma, namely, Mr. Vanraj Kahor and Mr. Vimal Patel. It was also observed that Grishma had executed structured, synchronized trades and indulged in reversal of trades for its client, Mr. Jivraj Zala with Ms. Lopa on both BSE and NSE and with Swift Tie-up Private Limited on BSE.

Page 4 of 8 e. The mode of collection of margin and the quantum of margin that a stock broker may collect has been left to the discretion of stock brokers vide SEBI Circular dated February 23, 2005. Its risk management policy inter alia envisaged collection of margins by way of cheques. Therefore, it cannot be held liable for collection of margin amounts from Mr. Jivraj Zala by way of cheques. f. The charge that Grishma falsified its client ledger by recording therein the date of physical receipt of the cheques and not the date on which the underlying funds were credited in the account, is baseless. The recording of date of receipt of cheques is in accordance with the mercantile system of accounting. There is no obligation in law which requires a stock broker receiving margin payments by cheque to record only the actual date of credit of funds in the client ledger as the date of receipt of margins and that such a requirement is not even envisaged by SEBI. g. Stock brokers are required to record the date of receipt of the cheques in the ledger either on the date of the trade i.e., T or on a T+1 basis notwithstanding the fact that the cheques may get cleared only subsequently. h. Mr. Vimal Patel's (a client of Grishma) ledger maintained by Grishma in relation to the trades in the cash segment (at BSE and NSE) and Futures & Options (F & O) Segment (at NSE) as on October 14, 2011 i.e., the date of trades, shows that his account had a debit balance of ₹16,50,000/- and therefore, t

Source: SecMarx — sebi:WTM/RKA/IVD/ID-2/49/2012. 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.