sebi:WTM/VKC/ID6/32/07
Facts / Headnote
Penalty of 'censure' imposed on the broker
Provisions invoked
- s. 19
Regulations relied on
- SEBI (Enquiry & Penalty) Regulations, 2002
- SEBI (PFUTP) Regulations, 1995
- SEBI (Stock Brokers) Regulations, 1992
Parties
- Kanodia Stock Broking Pvt. Ltd.
Holding
The Whole Time Member found that Kanodia Stock Broking Pvt. Ltd. had carried out 44 synchronized trades in the scrip of Ranbaxy Laboratories Ltd. with a view to create misleading appearance of trading, thereby violating Regulation 4(b) and (c) of the PFUTP Regulations, 1995 and Regulation 7 read with Section A(3) and (4) of the Code of Conduct under the Stock Brokers Regulations, 1992, and imposed a penalty of 'censure'.
Full text
d) The Enquiry officers report mention that Mr. Ashok Kumar Poddar was declared defaulter and subsequently his registration was cancelled. In this also, the language used by t indicates that the fault of transaction got matched is with us and not of the system. We would like to know who allowed Mr. Ashok Kumar Poddar to become a member and who all a SEBI registration to transact on the stock exchanges. Definitely it is not our fault. Are you now going to suspend yourself for allowing such brokers to become member of sto destroy the investors protection and confidence of which you project yourself as ‘masiah’ and only body to care for.”
Buy Mem Name Trade date Buy Order time Buy
5.10 I am of the view that such synchronization of trade irrespective of volume will affect the real price discovery. The intention of the parties to execute such transactions could be inferred from the circumstances because direct evidence in such cases may not be available. Further, several of these trades can not be treated as mere coincidence in such a liquid scrip. I observe tha aforementioned 44 transactions give an impression that these were all synchronized in view of perfect matching of quantity, price and time. I also observe that the Broker had done nu synchronised trades on September 22, 1999 (4 trades), September 28, 1999 (5 trades), October 08, 1999 (4 trades) and October 15, 1999 (8 trades). I find that 44 synchronised trades don Broker have been matched with 22 brokers during a period of five months. However, no clear pattern emerges from these transactions. 5.11 Evidently the Broker has put these trades with a view to create misleading appearance of trading. This synchronization of trades tampers with price discovery mechanism of stock exchange hampers transparency. These trades abetted in creating artificial volumes and false market in the scrip of Ranbaxy Laboratories Ltd. Therefore, I find that the Broker had violated the provis (b) and (c) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 and Regulation 7 read with Section A (3) and (4) of Code of Co specified in Schedule II of SEBI (Stock Brok
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Source: SecMarx — sebi:WTM/VKC/ID6/32/07. 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.