sebi:WTM/TCN/ID6/27/06/2007

SEBI · SEBI · 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

Minor penalty of censure imposed on the sub-broker for violation of Clause A(2) of the Code of Conduct for sub-brokers

Provisions invoked

• s. 19
• s. 77

Regulations

• Reg. 13
• Reg. 15
• Reg. 6(1)
• Reg. 9

Parties

• M/s. Jyotish Bhogilal Stock Brokers Private Limited

Holding

The sub-broker was held liable for violating Clause A(2) of the Code of Conduct for sub-brokers under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, and a minor penalty of censure was imposed for failing to exercise due skill, care and diligence in dealings with clients.

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 PENALTY) REGULATIONS, 2002 AGAINST M/S. JYOTISH BHOGILAL STOCK BROKERS PRIVATE LIMITED, BEARING SEBI REGISTRATION NUMBER INS 010736432/01-05028, REGISTERED AS SUB-BROKER TO M/s. PRABHUDAS LILADHAR PRIVATE LIMITED, MEMBER, THE STOCK EXCHANGE, MUMBAI AND THE NATIONAL STOCK EXCHANGE, IN THE MATTER OF M/s. CONTINENTAL CONTROLS LIMITED

WTM/TCN/ ID6/27/06/2007 1.0 BACKGROUND 1.1 The Securities and Exchange Board of India (SEBI) conducted an investigation into the abnormal price and volume rise in the scrip of M/s. Continental Controls Ltd. (hereinafter referred to as “the company” or “CCL’) during July 2002. It was alleged that the increase in price and volumes in the said scrip was a result of manipulation in the scrip by various market players. During the course of the investigations it was observed that M/s. Jyotish Bhogilal Stock Brokers Private Limited, registered as a sub-broker to M/s. Prabhudas Liladhar Private Limited, Member, The Stock Exchange, Mumbai (herein after referred to as ‘BSE’) and the National Stock Exchange (NSE) was also involved in dealing in the said scrip. CCL published an advertisement in ‘The Business Standard’ and other newspapers stating that on 27th July 2002 the company’s board meeting was to be held to consider the buy back of 12, 00, 000 shares (15% of the paid up equity capital) at Rs. 25 per share. It is worth noting that the price of the scrip during 1st week of July 2002 was only around Rs. 5 – Rs. 6 and book value of the scrip was around Rs. 11.50. The scrip witnessed trading of a volume of more than 8 lakh shares on 10th July 2002 with price touching Rs. 12.75. Further on 11th July 2002, the day on which the said advertisement was published in Economic Times and Mumbai Samachar, trading in the scrip of the company was at a record volume of around 10 lakh shares at BSE.

1.2 Investigations conducted by SEBI found that during the period 1st June 2002 and 31st July 2002, M/s. Jyotish Bhogilal Stock Brokers Pvt. Ltd. (hereinafter referred to as “the sub-broker”), bearing SEBI registration No. INB 020916831 and registered as sub-broker with M/s. Prabhudas Liladhar Private Limited (hereinafter referred to as “PLPL”) a member of BSE and NSE, had bought 1, 41, 100 shares and sold 2, 00, 028 shares on BSE. Trading of the sub-broker in this scrip contributed around 99% of the total quantity traded by PLPL. Further as the sub-broker had not executed client registration forms properly, signature of client was not available. While the sub-broker started trading on behalf of one Shri Mahesh M. Shah from 8th July 2002, the member client agreement was signed only on 17th July 2002 by which time the sub-broker had made a payment of Rs. 25 lakh and as admitted by the sub-broker, had received delivery of shares around 1 lakh from Shri Mahesh M. Shah. 1.3 It was further found that Shri Mahesh M. Shah had purchased 40, 000 shares which were transferred into the account of one Shri Atul B. Shah, Proprietor of M/s. Charmi Investments. It was further found that the shares sold by Shri Mahesh M. Shah were delivered from three accounts namely Shri Mukesh Bachubhai Shah, Shri Ashish P. Shah and Shri Vinod N. Desai to the account of the sub-broker. Details of such transfers are as under DELIVERIES FROM / TO (DP ID / CLIENT A/C NO.) DATE NO. OF SHARES Mukesh Bachubhai V

Source: SecMarx — sebi:WTM/TCN/ID6/27/06/2007. 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.