2013 (11) TMI 852 - AT - Companies Law

Violation of Regulations 4(2)(a),(b) and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 - Appellants were connected entities and had executed synchronized reversal trades, cross trades executed by Crystal, through its broker - Held that - No ground to interfere with the impugned order that the Appellants were guilty of violating the FUTP Regulations - However, in consideration to facts and circumstances of case penalty imposed on the appellants is reduced to 50% - Decided partly in favour of appellant.

Summary

Issues: Violation of SEBI regulations leading to imposition of monetary penalties

Analysis:
1. Violation of SEBI Regulations: The case involved a violation of Regulations 4(2)(a), (b), and (g) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, in trading shares of a specific company. The investigation revealed that the appellants engaged in synchronized reversal trades through a sub-broker, resulting in profit for some appellants and losses for others. These transactions were deemed as profit and loss adjustments, indicating a violation of the regulations.

2. Imposition of Penalties: The Adjudicating Officer imposed a consolidated penalty of Rs. 8,50,000 on the appellants for the violations identified. The appellants challenged this order through an appeal, arguing that they were individual intra-day traders who had not gained from price fluctuations and had not engaged in off-market dealings. They claimed the violations were inadvertent and without any intention to manipulate prices.

3. Arguments and Decision: The appellants' counsel contended that the violations were due to inadvertence and should not be repeated. On the other hand, the respondent's counsel argued that the appellants, being family members, manipulated prices and should have acted more responsibly. After considering the submissions, the appellate tribunal upheld the impugned order but reduced the penalty by 50% to Rs. 4,25,000 in the interest of justice.

4. Final Decision: The appeal was dismissed, and the modified penalty amount was directed to be paid by the appellants within two months from the date of receipt of the order. The tribunal found no grounds to interfere with the original order but considered the reduction in penalty appropriate given the circumstances of the case.