sebi:WTM/SR/SEBI/EFD-DRA2/09/02/2016

SEBI · SEBI · 2004-10-14 · S. Raman, 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

Madhuvan Securities Private Limited prohibited to take up new assignments for a period of five working days, with Order to come into force on expiry of 21 days from date of order; enquiry proceedings disposed of accordingly.

Provisions invoked

• s. 11B
• s. 19

Regulations

• Reg. 7
• Reg. 4
• Reg. 3
• Reg. 13(2)
• Reg. 13
• Reg. 4(b)
• Reg. 199
• Reg. 4(2)
• Reg. 200
• Reg. 28(2)
• Reg. 27
• Reg. 38

Parties

• Madhuvan Securities Private Limited

Holding

Madhuvan Securities Private Limited facilitated manipulation in the scrip of Adani Exports Ltd. through structured and self trades violating Regulation 4(2)(a) and (b) of PFUTP Regulations 2003 and Regulation 7 of Brokers Regulations, and was prohibited from taking up new assignments for five working days.

Full text

Page 2 of 21 4. Based on the findings of the investigation, SEBI vide order dated October 14, 2004, initiated Enquiry proceedings in terms of the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (‘Enquiry Regulations’) to enquire into the alleged violations / contraventions mentioned above. On completion of the proceedings, the Enquiry Officer, vide Enquiry Report dated August 11, 2005 recommended a penalty of suspension of Certificate of Registration of Madhuvan for a period of one month.

Page 3 of 21 Regulations, volume and number of transactions entered into are considered as an important parameter in order to conclude that the transactions are manipulative transactions. Inspite of this, the Enquiry Officer has come to a conclusion that the scrip of Adani Exports Ltd. was being manipulated. The Enquiry Officer has rightly concluded that the transactions in the scrip of Adani Exports Ltd are being carried out by two clients which constituted 68% of the trades on NSE and BSE. There is no finding or evidence to suggest that directors or persons closely associated directly or indirectly connected with Madhuvan had entered into transactions of Adani Exports Ltd. It is only two clients who entered into transactions of Adani Exports Ltd. 5) It is submitted that no evidence has been supplied to us to indicate that Madhuvan has acted in concert with two clients and two other brokers. In fact Madhuvan has no dealings of its own particularly with JBS Securities Pvt Ltd (JBS) and Money Care Securities Pvt Ltd. (Moneycare). No director related or employed is connected or associated with either Moneycare or JBS. It is submitted that Madhuvan has no personal or professional connection with either Moneycare or JBS. It is submitted that Madhuvan has no information regarding the fact that Abhinav and Prerak have been reversing their positions on the NSE and BSE so as to create illusory and artificial volumes. Madhuvan can have information of the reversal of the positions only

Page 4 of 21 does not permit or does not make it possible for any broker to have information regarding the name of the counter party, broker or their client. Even after the settlement is over, it is not possible for the broker to have information regarding the counter party, broker or these clients. The Enquiry Officer has no evidence to conclude that Madhuvan had information regarding the names of the counter party, clients or broker. In the absence of evidence, the conclusion arrived at by the Enquiry Officer is erroneous. 9) On the basis of the chart, the Enquiry Officer has also come to a conclusion that there were structured and synchronized matching trades in the scrip of Adani Exports Ltd. With reference to the same, Madhuvan has not entered into matching, synchronized and structured trades. Madhuvan has only put in trades for on behalf of Prerak and Abhinav. It has no information regarding the matching of trades done by Abhinav or by anybody else. If at all SEBI wants to take any action on this transaction it only can seek information from Prerak as well as Abhinav. The Enquiry Officer has relied on judgment of Securities Appellate Tribunal in the case of Nirmal Bang Securities (P) Ltd. v/s. SEBI. In the fact of that case it appears that there was synchronized trading by the counter party brokers. However in this case, Madhuvan has not entered into any synchronized matching or non-systematic transactions with the same counter parties. 10) The Enquiry Officer has come

Source: SecMarx — sebi:WTM/SR/SEBI/EFD-DRA2/09/02/2016. 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.