sebi:WTM/TCN/06/ID3/05/2007
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Facts / Headnote
Censure imposed on GSB Securities Pvt. Ltd.; Enquiry Officer's recommended two-month suspension of certificate of registration held excessive and not imposed.
Provisions invoked
- s. 19
Regulations
- Reg. 7
- Reg. 199
- Reg. 13(4)
- Reg. 4(b)
Parties
- GSB Securities Pvt. Ltd.
Holding
GSB Securities Pvt. Ltd. was held to have violated Clause A(2) of the Code of Conduct under Regulation 7 of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 by failing to exercise due skill, care and diligence in dealing with its client M/s Jem Fiscal Ltd. The penalty of censure was imposed instead of the two-month suspension of registration recommended by the Enquiry Officer.
Full text
Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ ORDER (UNDER REGULATION 13(4) OF SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING ENQUIRY BY ENQUIRY OFFICER AND IMPOSING
other, squaring up positions and reversing trades either on the same day or during the same settlements, making the net receivable/deliv positions as either nil or shares of negligible quantities i.e about 100 to 200 shares. Thus, all the aforesaid clients had done transactions of fic nature, through different members of NSE and BSE and established /created artificial volumes in the scrip. 1.10 GSB Securities Pvt. Ltd. (hereinafter referred to as “GSB”) is a member of NSE. GSB has traded in the scrip of MHL on behalf of M/s Jem Ltd., who started trading with them from August 2000. It was observed that GSB has not collected any initial margin from Jem Fiscal an normally squaring off the position in the same settlement. 2.0 Enquiry Proceedings 2.1 In view of the alleged irregularities committed by GSB, Chairman, SEBI, vide order dated February 18, 2002 appointed an Enquiry Offi enquire into the contravention/s alleged to have been committed by GSB while dealing in the scrip of MHL. Enquiry Officer issued a show notice dated March 20, 2002 to GSB for the alleged irregularities. It has been alleged that GSB failed to exercise due skill, care and diligenc dealing with the client, M/s. Jem Fiscal in violation of clause A (2) of Code of Conduct as laid down under Schedule II read with Regulatio SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 (hereinafter referred to as ‘Broker Regulations’) and also violated Regulation 4(b) o (Prohib
which the average quantity traded during August- December, 2000 was in the range of 18,000 to 25,000 shares per day. 1.4 Similarly, at NSE, the volume of the scrip during May- August, 2000, were in the range of 200 to 500 shares and the scrip was infrequently traded. However, after August 25, 2000, the volume in the scrip went up manifold and was in the range of 18,000 to 25,000 shares per day. During the period August 2000 – December 2000, the average trading volume at NSE was approximately 22,000 shares per day. 1.5 The price of the share at BSE, which was Rs.193.30 as on August 25, 2000, rose to Rs. 264.25 on September 8, 2000 and fell to Rs. 138.95 on November 27, 2000. A similar pattern was noticed at NSE also. 1.6 It was observed that the P/E ratio of MHL was not in synchronisation with the rest of the hotel industry. The rise in price and volumes observed during the investigation period did not appear to be justified based on fundamentals of the company. Further, investigation revealed that 80% of the total quantity traded during the investigation period was on account of a few brokers of BSE and NSE. It was found that ultimate clients had acted in concert through selected members and engaging themselves in circular trading in the scrip of MHL. 1.7 The investigation further revealed that most of these clients had not paid any margin to the brokers for the trades executed by them. Further they were squaring off their positions not only at the end of the settlement but a
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Source: SecMarx — sebi:WTM/TCN/06/ID3/05/2007. 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.