2013 (10) TMI 1532 - AT - SEBI

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Delay in passing the impugned order.
3. Relationship between broker and client.
4. Evidence of synchronized circular trades.
5. Impact of the appellant's overall turnover on penalty imposition.

Summary:

Violation of Principles of Natural Justice:
The appellant argued that the impugned order violated principles of natural justice as the entire investigation report was not furnished, and there was no opportunity to examine the client Mr. Heerachand Salecha. The Tribunal found no merit in these contentions, stating that the documents relied upon by SEBI were supplied to the appellant and that the appellant did not demonstrate how the non-furnishing of the entire report caused prejudice. Furthermore, the Tribunal noted that the appellant's own trading records established the facts, making the examination of Heerachand Salecha unnecessary.

Delay in Passing the Impugned Order:
The appellant contended that the order was passed after an inordinate delay of 12 years, contrary to Regulation 28(2) of the Intermediaries Regulations. The Tribunal acknowledged the delay but held that it did not justify quashing the order. The Tribunal emphasized that a person who has violated SEBI regulations cannot escape liability merely due to the delay in the proceedings.

Relationship Between Broker and Client:
The appellant claimed that there was no relationship beyond that of a broker-client and thus should not be held liable for the client's manipulative trades. The Tribunal rejected this argument, noting that the appellant's trading pattern demonstrated a nexus with the client and other brokers within the group, indicating coordinated manipulative activities.

Evidence of Synchronized Circular Trades:
The Tribunal reviewed the evidence and found that the appellant engaged in synchronized circular trades, creating artificial volumes in the market. The Tribunal cited instances where trades were matched within seconds, indicating pre-arranged trading patterns. The Tribunal concluded that the appellant was part of a group executing circular trades to manipulate the price of the SIL scrip.

Impact of the Appellant's Overall Turnover on Penalty Imposition:
The appellant argued that the turnover in the SIL scrip was minuscule compared to its overall turnover, suggesting that the penalty was unwarranted. The Tribunal dismissed this argument, stating that penalties for violating SEBI regulations are not contingent on the violator's total turnover. The Tribunal held that even if the turnover in the specific scrip was small, the appellant must face penalties for the violations.

Conclusion:
The Tribunal dismissed the appeal, upholding the SEBI order prohibiting the appellant from taking up any new assignments for two weeks. The Tribunal found no merit in the appellant's contentions regarding natural justice, delay, broker-client relationship, and the impact of overall turnover on penalty imposition.