Securities Appellate Tribunal
N J Shares & Securities Pvt. Ltd. vs Sebi on 10 August, 2010
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 21 of 2007
Date of decision: 10.8.2010
N J Shares & Securities Pvt. Ltd.
59/10, Kalkaji Extension,
New Delhi. ...Appellant
Versus
Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A,
G-Block, Bandra Kurla Complex,
Bandra (East), Mumbai. ...Respondent
Mr. N.J. Grover, Chartered Accountant for the Appellant. Mr. Kumar Desai, Advocate with Mr. Kersi Dastoor, Advocate for the Respondent. Coram : Justice N. K. Sodhi, Presiding Officer Samar Ray, Member P.K. Malhotra, Member Per : Justice N. K. Sodhi, Presiding Officer (Oral) The appellant before us is a member broker of the National Stock Exchange of India Limited registered with the Securities and Exchange Board of India (for short the Board). One, Ivory Securities Ltd. traded through the appellant in the scrip of Astra IDL Ltd. (now known as Astraseneca Pharma India Ltd.) and the counter party was Dinils Adhesives Pvt. Ltd. which traded through its broker, Fincap Portfolio Ltd. It is alleged that the appellant and the counter party broker namely, Fincap Portfolio Ltd. executed manipulative synchronized trades in the aforesaid scrip which trades were later reversed between the two brokers, the clients remaining the same. In other words, when Ivory Securities Ltd. sold the shares, it was Dinils Adhesives Pvt. Ltd. which bought them and when the latter sold them, the former was the buyer. In all these trades the appellant was the broker for Ivory Securities and Fincap Portfolio 2 traded for Dinils Adhesives. We have perused the chart showing the trades executed by the appellant and its counter party broker on behalf of their clients. A large number of trades were executed on August 6, 2001 and again on August 7, 2001 and the trades were subsequently reversed on the same day. For instance, the appellant sold the shares on behalf of Ivory Securities Ltd. and those were purchased by Dinils Adhesives Pvt. Ltd. with Fincap Portfolio Ltd. as its broker. Having sold the shares, the appellant then purchases those shares and the counter party again happens to be Dinils Adhesives Pvt. Ltd. acting through Fincap Portfolio Ltd. Such large number of trades cannot be executed between the same parties through the same brokers unless the trades are being manipulated. As usual, the only explanation offered by the appellant as the broker is that it was not aware of the counter party or the counter party broker at the time when the trades were executed through the trading system of the exchange. It is true that the trading system of the exchange maintains anonymity of the parties and their brokers and in our opinion the appellant is taking shelter under the anonymity of the system and when we lift the veil, we find that the two counter parties through their respective brokers including the appellant were playing mischief. Firstly, such a large number of trades cannot match between the same parties and then they cannot get reversed between those very parties on the same day. The irresistible inference that one can draw from the trading pattern of the appellant along with its counter party broker is that they were manipulating the trades by punching in the buy and sell orders at the same point of time or around the same time for the same quantity at the same price. We are, therefore, satisfied that the appellant violated Regulation 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995. In this view of the matter, no fault can be found with the findings recorded by the whole time member suspending the certificate of registration of the appellant for one month. The learned authorised representative for the appellant placed reliance on a decision of this Tribunal in Shreehari Hira Stock Broking Pvt. Ltd. vs. Securities and Exchange Board of India, Appeal no. 247 of 2009 decided on June 14, 2010. We have perused this order and find that it does not help the appellant nor does it advance its case. That case has different facts and has no applicability to the facts of this case. 3 However, from the annexures to the show cause notice which gave the details of the trades executed by the appellant, we find that even though the period of investigation was from July 30, 2001 to August 10, 2001, the appellant traded only on two days on August 6 and August 7, 2001. We also find that the appellant executed trades for very small quantities and during those two days the price of the scrip had moved marginally though it moved substantially thereafter for which the appellant cannot be held responsible. This apart, the trades were executed more than 9 years back and the Sword of Damocles has remained hanging on the appellant. The learned authorised representative points out that during the last 9 years period the appellant has not been involved in any market irregularity. Having regard to all these circumstances, we reduce the penalty to warning. The appellant is warned not to indulge in such types of trades in future. The impugned order shall stand modified accordingly.
The appeal stands disposed of as above with no order as to costs.
Sd/-
Justice N.K. Sodhi Presiding Officer Sd/-
Samar Ray Member Sd/-
P.K. Malhotra Member 10.8.2010 Prepared and compared by:
msb/-