2003 (10) TMI 676 - AT - Companies Law

Summary

Issues involved: Market manipulation, synchronized trading, short sales, dealing with unregistered sub-brokers.

The Securities Appellate Tribunal (SAT) examined the charges leveled by the Securities and Exchange Board of India (SEBI) against the appellants - Nirmal Bang Securities Ltd. (NBS), Bang Equity Broking Pvt. Ltd. (BEB), Bama Securities Ltd., and Bang Securities Pvt. Ltd. (BSPL) - for alleged market manipulation and violation of SEBI regulations.

Charge of indulging in large trading transactions to depress the market artificially in a concerted manner: The SAT found that this central charge against all four appellants remained unsubstantiated. The appellants' share of transactions in the relevant scrips, compared to the total volume traded on the exchanges, was too small to have caused the alleged market crash. SEBI failed to provide reasonably convincing evidence to establish this charge.

Charge of dealing with unregistered sub-brokers against NBS and BEB: This charge failed as SEBI did not produce sufficient evidence to prove that the entities in question were unregistered sub-brokers.

Charge of short sales after SEBI's ban against NBS and BEB: This charge was established based on the records provided.

Charge of synchronized deals against BEB with First Global Stock Brokers (FGSB): The SAT found that the data furnished in the show-cause notice proved the synchronized nature of the transactions between BEB and FGSB, which violated Regulation 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 1995.

Charge of sales in time slots against Bama: The SAT concluded that Bama's sales during specific time slots contributed to the market fall, and this charge was established.

No charges were established against BSPL.

Penalty: Considering the established charges, the SAT modified SEBI's order of cancellation of registration certificates. NBS's certificate was suspended for 2 years, BEB's and Bama's certificates were suspended for 3 years, and the cancellation order against BSPL was set aside.