sebi:WTM/TCN/72/IVD/12/06

SEBI · SEBI · 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

Suspension of certificate of registration for a period of two months

Provisions invoked

• s. 19

Regulations

• Reg. 7
• Reg. 4
• Reg. 199
• Reg. 13(4)
• Reg. 13(2)
• Reg. 13
• Reg. 5
• Reg. 6(1)

Parties

• M/s B M Gandhi Securities Pvt. Limited

Holding

The registration of M/s B M Gandhi, member, Bombay Stock Exchange Limited, SEBI Registration No. INB 01984835, is suspended for two months for failure to exercise due skill, care and diligence in violation of Clauses A(1), A(2), A(3) and A(4) of the Code of Conduct read with regulation 7 of the Broker Regulations.

Full text

Ramanlal D Shah  1000 14:10:37 Ramanlal D Shah  2000 14:14:03 Ramanlal D Shah 1000 14:19:02 Ramanlal D Shah 1000 14:19:16

4. 0 Consideration of the Issues and Findings 4.1 I have carefully examined the facts and circumstances of the case, investigation reports, the Enquiry Report and other material on record. A group of connected clients and sub and brokers indulged in manipulation in the scrip of MEL and the broker B M Gandhi Securities Private Limited was a part of this group. The group contributed to major portio total volume in the scrip in the market. Such pattern of trading cannot be done without the active participation and knowledge of the brokers. I have also considered the ora as written submission made by the broker including the Written Submissions of the broker filed after the personal hearing before me. 4.2 I note that BSE being a self regulatory organization and first level regulator had, through its in-house surveillance system, noticed these very dubious trades executed by certain through its members (brokers) and after examining the role played by them in such trades issued show cause notices. BSE found that M/s. B.M. Gandhi Securities Ltd. th herein, by indulging in these fictitious trades which created artificial volumes, had violated Bye-laws nos. 355 (a) and 357(ii) of the BSE Bye-laws and imposed a fine of Rs. upon broker.  Bye-law no. 357 of BSE provides as under: Bye-law-357 : “ A member shall be deemed guilty of unbusinesslike conduct for any of the following or similar acts are omissions namely – (ii) if he makes a fictitious transaction or gives an order for the purch

1.7 The investigation further revealed that the volume in MEL was increased substantially in the period from December 1999 to January, 2000 (from 100 shares on December 20, 1999 to 1,50,800 shares on January 7, 2000). The price of the scrip increased from Rs. 8.95 on December 20, 1999 to Rs. 20.15 on January 12, 2000. 1.8 It was further revealed during investigation that M/s. Harvic Management Services (I) Ltd., the sub-broker registered with M/s. B M Gandhi Securities Private Limited and M/s. Havermore Financial Services (I) Ltd. were allotted 1,64,100 shares and 1,50,000 shares respectively which amounts to 3,14,100 shares which is 5.80% of the total issued and subscribed capital of the company. Also, the directors of these companies, Mr. Hemang Jangla, Mr. Kalpesh Chawalla, Sangita Chawalla and Vibha Jangla were allotted 1,00,000 shares each. Total acquisition of these persons along with their companies in MEL amounted to 7,14,100 shares which was 13.19% of the issued and subscribed capital of the company. After the shares were allotted, these entities indulged in creating artificial volume in MEL at BSE by trading among themselves. The following table shows the trading pattern of the above entities: Structured Deals Executed on August 7, 2000: Broker

Source: SecMarx — sebi:WTM/TCN/72/IVD/12/06. 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.