sebi:WTM/RKA/IVD-NRO/05/2012
Facts / Headnote
Warning issued to the noticee
Provisions invoked
- s. 19
Regulations relied on
- SEBI (Intermediaries) Regulations, 2008 — 28(2)
- SEBI (PFUTP) Regulations, 1995 — 6(a)
- SEBI (PFUTP) Regulations, 2003 — 3(c)
- SEBI (Stock Brokers) Regulations, 1992 — 7
Parties
- Inder Pal Singh (Proprietor of M/s. I P Singh & Co.)
Holding
The noticee, Inder Pal Singh, was found to have violated Clause A(2) of the Code of Conduct for stock brokers by failing to exercise due care, skill and diligence in dealing with his client Mr. Maganpreet Singh, and a warning was issued. The charge of misleading SEBI/DSE by making false complaints and spreading rumours was not established.
Full text
Page 2 of 5 proceedings submitted his report dated August 26, 2011, in which he gave the following findings and recommended warning to the noticee to avoid recurrence of such violation: (i) The noticee took unusually large positions in the shares of the company on behalf of his client Mr. Manganpreet Singh who defaulted in making payments, which in turn, resulted into default by the noticee in meeting his corresponding pay-in obligations. He, therefore, failed to exercise due care, skill and diligence in his dealings with the said client and thereby violated Clause A(2) of Code of Conduct for stock brokers as laid down under Schedule II read with regulation 7 of the Stock Broker Regulations. (ii) The charge that the noticee had mislead SEBI/DSE by making false complaints and spreading rumours regarding lost/stolen shares of the company to distort the market equilibrium and to cause fraud towards DSE and his other co-stock brokers can’t be established in the absence of complete document/evidence on record to support the said allegation. Therefore, benefit of doubt has been given to him in respect of this allegation.
Page 3 of 5 6. As regards the other charge of misleading SEBI/DSE by making false complaints and spreading rumours regarding lost/stolen shares of the company to distort the market equilibrium and to cause fraud towards his other co - stock brokers and DSE, I note that the DA has given benefit of doubt to the noticee in respect of this charge in the absence of document/evidence on record to prove the said allegation. I find that there is no change in the evidence/document at this stage. In the absence of any additional document/evidence, I agree with the view taken by DA so far as this charge is concerned.
Page 4 of 5 the company on behalf of his client Mr. Maganpreet Singh without appropriate margins or adequate balance in the client’s account with the noticee. I also find that the noticee’s net exposure of 1,75,300 shares in respect of Mr. Maganpreet Singh was significantly large and risky especially keeping in view the fact that it was not covered by appropriate margins. The over reliance or faith of the noticee on the client that he will make the payment on getting the delivery of large quantity of shares was something no prudent stock broker would do in securities transactions. The consequence was imminent as when the said client defaulted in making payments towards purchase of those shares, for whatever reasons, the noticee defaulted in meeting his pay-in-obligations. This ultimately led to payment crisis at the DSE because of which the management of DSE had to intervene in the matter. Pursuant to the intervention by the DSE, the noticee had to pay from his own pocket though belatedly. It is an admitted fact that there was delay in meeting pay-in-obligation at DSE by the noticee. The same is evident from the statement of the noticee made before the investigating authority and also confirmed by the fact that penalty was imposed by DSE on the noticee for the said delay/ default.
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Source: SecMarx — sebi:WTM/RKA/IVD-NRO/05/2012. 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.