2008 (10) TMI 705 - AT - SEBI

Summary

Issues Involved:

1. Whether the appellant executed trades with the intention of artificially raising the price of the scrip of JIK Industries Limited.
2. Whether the appellant violated Regulation 4(a) and 4(c) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995.

Summary:

Issue 1: Intention of Artificially Raising the Price

The primary question was whether the appellant executed trades on behalf of its client with the intention of artificially raising the price of the scrip of JIK Industries Limited (JIK). The adjudicating officer found the appellant guilty of violating Regulation 4(a) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995, by executing trades to artificially raise the price of JIK. However, the Tribunal observed that the appellant executed genuine trades through the trading system of the exchanges, and there was no collusion between the buyer and the seller. The Tribunal emphasized that a genuine trade reflects a genuine price of the scrip and that artificial price manipulation requires collusion, which was not established in this case.

Issue 2: Violation of Regulation 4(a) and 4(c)

The appellant was charged with violating Regulation 4(a) and 4(c) of the Regulations. Regulation 4(a) prohibits transactions intended to artificially raise or depress the prices of securities, while Regulation 4(c) prohibits transactions that are not genuine trade transactions. The adjudicating officer found the appellant guilty of violating Regulation 4(a) but did not record any finding for violating Regulation 4(c). The Tribunal noted that the adjudicating officer did not deal with the charge under Regulation 4(c), and thus, it was deemed to have been dropped. The Tribunal concluded that the buy orders executed by the appellant were genuine transactions and not intended to artificially raise the price of the scrip. The Tribunal also highlighted that the appellant's trading pattern indicated a desire to purchase shares rather than manipulate prices.

Conclusion:

The Tribunal concluded that the appellant did not artificially raise the price of the scrip of JIK and that the impugned order could not be sustained. The appeal was allowed, and the impugned order was set aside, with the parties bearing their own costs.