sebi:WTM/TCN/41/IVD/07/07

SEBI · SEBI · 2005-07-07 · Dr. T.C. Nair, 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

Enquiry proceedings disposed of with no penalty levied; recommendation of Enquiry Officer for no penalty accepted.

Provisions invoked

• s. 19
• s. 12

Regulations

• Reg. 4
• Reg. 7
• Reg. 13(4)

Parties

• M/s Hem Securities Ltd.

Holding

The enquiry proceedings against M/s Hem Securities Ltd. were disposed of without levying any penalty, as the charges of fraudulent and unfair trade practices and stock broker regulation violations were not established with reasonably good evidence.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ Order in the matter of M/s Hem Securities Ltd Jul 25, 2007 | Orders : Orders of Chairman/Members WTM/TCN/ 41 / IVD/07 / 07 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: Dr. T.C.NAIR, WHOLE TIME MEMBER IN THE MATTER OF M/s HEM SECURITIES LTD. MEMBER, BOMBAY STOCK EXCHANGE LIMITED (INB011069953)

1.0 Background 1.1 SEBI had conducted investigations into the alleged price manipulation in the scrip of DSQ Biotech Ltd. (hereinafter referred to as “DSQ”) for the period at NSE from September 2000 to January 2001 and at the BSE from July 2000 to November 2000 (hereinafter referred to as the “investigation period”). 1.2 Investigation revealed that DSQB had increased the share capital by making a preferential issue in 2000. It was observed that prior to and after the period of the issue i.e. between December 1999 to January 2001 abnormal activity in the scrip was noticed at the NSE and BSE accompanied by a large number of structured deals wherein the buy and sell clients were related entities. 1.3 The volumes in the scrip during the investigation period were attributed to the synchronized trades and fictitious trades were executed by the entities through accommodating brokers. Further it was seen that trades were also used to avail of the finance from the system. It was alleged that the brokers connived with the DSQ Group to trade and offload unlisted preferential shares into the market. 1.4 M/s Hem Securities Ltd. (hereinafter referred to as “the broker”) Member of the Bombay Stock Exchange Ltd. (hereinafter referred to as “BSE”), registered with SEBI as a stock broker under Section 12 of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “the SEBI Act”) was alleged to have violated the provisions of Regulation 4 (b), (c) and (d) of SEBI (Prohibitio

1995 (hereinafter referred as 'FUTP') and Clauses A (1) to (5) of Schedule II read with Regulation 7 of SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 (hereinafter referred to as the ‘Stock Broker Regulations’). 2.2 In view of the findings of the investigation, an Enquiry Officer was appointed, vide Order dated July 07, 2005 to enquire into the alleged violations made by the broker. On completion of enquiry, the Enquiry Officer submitted his report dated November 28, 2006 recommending no penalty on the broker. 2.3 In said enquiry report, the enquiry officer has found that the client on behalf of whom the broker dealt and who was a major buyer had only purchased the shares through the broker. The broker submitted that as it was only the buying broker, the charge of synchronization and creating artificial volume through circular trading, is improbable. The Enquiry Officer observed that although the trades may be synchronized by the clients, the charge of circular trading can not be levied against the broker as it was only buying and the client was taking delivery of shares. It was however, possible to levy this charge if it was proved that there was a nexus of the broker with the client and the counter party selling broker. There was nothing on record to prove the same. 2.4 After taking into consideration the facts and circumstances of the case and the findings of the Enquiry Officer mentioned in the report and the relevant provisions of law governing the case, I have c

Source: SecMarx — sebi:WTM/TCN/41/IVD/07/07. 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.