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Issues involved: Inspection findings, adjudication proceedings, violations of Acts and Regulations, imposition of monetary penalty, benefit of doubt, discrepancies in client registration forms, stamping of agreements, maintenance of records of investors' complaints, procedural requirements during inspection.
Inspection Findings and Adjudication Proceedings: The appellant, a registered company offering equity broking and depository participant services, was inspected by the Board for deficiencies in record maintenance. The inspecting team submitted two reports highlighting irregularities in stock broking and depository participant activities. Adjudication proceedings were initiated based on these findings, leading to a monetary penalty imposed on the appellant for violations of relevant Acts and Regulations. Benefit of Doubt - Client Registration Forms: One charge against the appellant involved discrepancies in client registration forms. The appellant explained that some clients were directly introduced or introduced by company employees, supported by undated letters. The adjudicating officer rejected this defense due to lack of production before the inspecting team. The Tribunal, considering faulty inspection procedures, gave the benefit of doubt to the appellant, emphasizing the lack of queries from the inspecting team during the inspection. Stamping of Agreements: Allegations regarding unstamped agreements were partially accepted by the adjudicating officer. The appellant's explanation of crossed stamp papers for agreements was not fully acknowledged, leading to a finding of lack of due care and diligence. The Tribunal disagreed, stating that crossed stamp papers with party names suffice as valid cancellation for agreements, rejecting the officer's reasoning. Maintenance of Records of Investors' Complaints: The appellant was accused of not maintaining investor complaint records properly, violating stock broker conduct codes. The appellant defended by stating records were kept in MS-Excel files and client correspondence files. As no evidence disproved this claim, the Tribunal disagreed with the adjudicating officer's finding of deficiency in record maintenance. Procedural Requirements During Inspection: The Tribunal highlighted that many deficiencies could have been clarified if queries were made during inspection. Emphasizing the non-punitive nature of inspections, the Tribunal noted the importance of pointing out irregularities during inspections to ensure compliance. Lack of queries during inspection led to the benefit of doubt being given to the appellant. The appeal was allowed, setting aside the impugned order with no costs imposed.
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