sebi:WTM/RKA/MIRSD/SRO/27/2015

SEBI · SEBI · 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

Ex-parte order restraining the noticees from accessing the securities market, directing them to cease unregistered portfolio management and other unregistered securities activities, to withdraw all advertisements, and prohibiting them from mobilizing funds from clients or offering PMS-related activities; noticees given 21 days to file objections and seek a personal hearing.

Provisions invoked

• s. 19
• s. 12(1)
• s. 12A

Regulations

• Reg. 3
• Reg. 2(1)(c)
• Reg. 4(1)
• Reg. 5
• Reg. 11(1)

Parties

• M/S Sri Ganesh Stocks and Shares
• Mr. C. Venkatesan
• Ms. Vijaya Bharathi K.

Holding

The noticees — Ganesh Stocks and Shares, C. Venkatesan and Vijaya Bharathi K. — prima facie acted as unregistered stock brokers, unregistered sub-brokers and unregistered portfolio managers, and engaged in fraudulent and unfair trade practices, and are restrained from accessing the securities market and from undertaking any unregistered securities or portfolio management activity.

Full text

M/S Sri Ganesh Stocks and Shares and Ors. Page 2 of 21 (h) Some of the covenants of the said agreement are as under: (i) the sub-broker will do transactions such as buying/selling on behalf of the client in the trading account in equity market/derivative market/commodity market; (ii) the sub-broker is at liberty to do buy/sell transactions with any main broker whom he may deem fit; (iii) the client being assured monthly returns for the investments made, which would be transferred to the client’s bank account by way of NEFT transfers after deduction of the brokerage and other government levies; (iv) the sub broker indemnifying the client for any losses in the capital invested by the client and towards this end the sub broker issuing a post dated cheque to the investor for an amount of `1 lakh and any disputes arising out of the agreement will have jurisdiction in the Court of Chennai, etc.

M/S Sri Ganesh Stocks and Shares and Ors. Page 3 of 21 these client accounts were active till July 2014. (o) Vijaya Bharathi was also registered as an Authorised Person with Nirmal Bang in the Cash and F&O segments with registration no. “AP110576691”. (p) Venkatesan has admitted that the process flow for dealing with clients through Nirmal Bang was similar to that followed in the case of Saravana as stated above and the funds collected from various clients were used for trading under the client codes, namely, Venkatesan (S3600006) and Vijaya Bharathi (S3600007); (q) There were 64 investors registered with Venkatesan under the private agreement out of which 7 clients have opened the trading account with Nirmal Bang; (r) Venkatesan has informed that out of `4.36 Crores collected from his clients with whom he had entered into private agreement, he had invested only around `85 Lakhs through the 2 trading accounts maintained with Nirmal Bang on behalf of other investors. The remaining fund was used to settle the financial commitment of the investors with whom the assured returns were promised through the private agreement that were entered into with them. (s) Venkatesan has claimed to have repaid `3.71 Crores (which includes principal amount and returns) to some of its investors. However, he did not provide any proof for repayment to NSE. (t) The process flow adopted by Venkatesan in dealing with his clients is as under: (i) The clients have to enter into a private agreement with

M/S Sri Ganesh Stocks and Shares and Ors. Page 4 of 21 (v) When an incognito call was made by the officials of NSE to listed phone number of Venkatesan, the person answering the call had refused to identify himself but provided an address where further details regarding investments, etc. could be obtained. Upon a visit to the said address, the NSE officials found Venkatesan available at the said address. Venkatesan also explained his investment schemes to the NSE officials. When the NSE officials disclosed their true identity Venkatesan disclosed further information about his investment schemes.

Source: SecMarx — sebi:WTM/RKA/MIRSD/SRO/27/2015. 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.