sebi:WTM/RKA/IVD/ID-4/40/2012

SEBI · SEBI · 2011-07-26 · 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

Restrained Ms. Anita Deepak Dalal from accessing the securities market and from buying, selling or otherwise dealing in securities for a period of 18 months for violation of PFUTP Regulations and SEBI Act.

Provisions invoked

• s. 19
• s. 12A

Regulations

• Reg. 11
• Reg. 3(a)

Parties

• Ms. Anita Deepak Dalal

Holding

The noticee, Ms. Anita Deepak Dalal, was found to have violated regulations 3(a), (b), (c), (d) and 4(1), 4(2)(a) and (g) of the PFUTP Regulations and section 12A(a), (b) and (c) of the SEBI Act by creating artificial volumes in the scrips of 'Bang', 'Confidence' and 'Cals' through trades with connected clients. She was restrained from accessing the securities market and dealing in securities for 18 months.

Full text

Page 2 of 12 3. SEBI completed the investigation into the trading in the shares of ‘Bang’ for the period March 01, 2008 to February 28, 2009, ‘Confidence’ for the period January 01, 2008 to February 28, 2009 and ‘Cals’ for the period June 01, 2008 to February 28, 2009 and found that Ms. Anita Deepak Dalal was involved in creating artificial volumes in the scrips of ‘Bang’, ‘Confidence’ and ‘Cals’ . Thereafter, SEBI issued a show cause notice (SCN) dated July 26, 2011 to Ms. Anita Deepak Dalal (‘the noticee’) under sections 11, 11(4) and 11B of the SEBI Act, 1992 read with Regulation 11 of SEBI (Prohibition of Fraudulent Unfair Trade Practices relating to Securities Market) Regulations, 2003 (‘PFUTP Regulations’) with respect to her trading in the scrips of ‘Bang’, ‘Confidence’ and ‘Cals’. The SCN alleged that the noticee had executed reversed trades, self trades and synchronized trades with 'connected clients', which resulted in the creation of artificial volumes in the scrips of ‘Bang’, ‘Confidence’ and ‘Cals’. The acts of the noticee were, thus, alleged to be in violation of regulations 3(a), (b), (c) and (d) and 4(1), 4(2) (a) and (g) of the PFUTP Regulations and section 12A(a), (b) and (c) of the SEBI Act.

Page 3 of 12 individual capacity and she is a distinct legal entity from Krishvi and her husband. The interpretation to deduce that being a director of a broking entity as well as wife of another member tantamount to association and/or connection is erroneous and improper. e. In an automated price mechanism system, it is impossible to reverse any trade since the counter party or the broker is not known. The observation in the SCN that on September 22, 2008 the noticee bought 14,302 shares from Chandra and on September 29, 2008 12,108 shares were sold to Maruti do not establish any reversal of trades. Further, it is impossible on screen based trading to know the counterparty client or the counterparty broker. f. With regard to synchronized trades, orders executed at time difference of 1 second are normal in the securities market and no adverse inference may be drawn from the same. Further, there were only 8 instances out of 361 where orders were executed at time difference of 1 second. SAT in case of Grishma Securities P. Ltd. vs. SEBI has held that synchronized trades per se are not illegal. g. The investigation has failed to consider that volume in particular scrip may be influenced by innumerable factors like general market trends, corporate announcements, demand and supply, instinct of buyers and sellers etc. Thus, the inference that the trades of 'connected clients' contributed significantly to the increase in the volume is without basis. h. Her trades were executed under

Page 4 of 12 k. In the scrip of ‘Confidence’, her percentage contribution was only 1.15% of the market volume and only on 9 days out of the 26 months investigation period. In only 11 trades out of the 118 trades shown in the annexure to the SCN, the quantity difference was zero. In the remaining 107 trades there was huge quantity difference as high as from 175,000 to 295,000. In only 78 trades out of the 118 trades the time difference was less than a minute in these trades. In the remaining 40 trades, there was time difference as high as ranging to 1 hr. between the sell and buy orders. Also there were no orders where all the three conditions were met. Further, her trades were executed under the ‘trade to trade’ segment which means that every trade was to be settled by giving and taking delivery. l. In the scrip of ‘Cals’, her percentage contribution was only 0.88% of the market volume and only on 8 days out of the 26 month investigation period. In only 22 trades out of total of 53 trades shown in the annexure to the SCN, there was zero price difference. In the remaining 31 trades, there was price difference between the sell order and the buy order. In only 4 trades out of the 53 trades, the quantity difference was zero. In the remaining 49 trades there was huge quantity difference as high as from 450,000 to 975,000. In all the 53 trades the time difference was more than 1 minute. Also there were no orders where all the three conditions of time difference being less than 1 mi

Source: SecMarx — sebi:WTM/RKA/IVD/ID-4/40/2012. 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.