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Issues involved: Securities trading violations, self-trades, violation of regulations, penalty imposition.
The judgment by the Securities Appellate Tribunal, Mumbai, involved two appeals arising from identical facts regarding securities trading violations. The appellant, a stock broker, traded in the scrip of a company leading to investigations by regulatory bodies for potential violations of regulations. The investigations revealed that the appellant and two other brokers executed self-trades, constituting a significant portion of the total trades on the day of listing. The appellant defended the trades as being carried out by jobbers in its pro-account through different terminals, permitted by the stock exchange. The appellant argued that there was no malicious intent and that the trades were within permissible limits. The appellant's defense was countered by the respondent Board, stating that the appellant misused the facility of using own account through trading terminals by engaging independent day traders. The Board highlighted that the relationship between the appellant and the operators was not in line with pro-account trading regulations. The Board contended that such practices could manipulate the market and mislead investors, breaching the regulatory framework. After considering the arguments, the Tribunal agreed with the Board's view, emphasizing that the appellant's trading method resulted in fictitious trades, creating artificial volume and misleading signals to investors. Regarding the penalties imposed under sections 15 HA and 15 HB of the Act, the appellant argued that the penalties were unreasonably high. However, the Tribunal found the penalties imposed by the Board to be just and reasonable considering the gravity of the violations. Ultimately, both appeals were dismissed, upholding the penalties imposed by the Board.
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