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TMI Blog2009 (4) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellants stand as follows : (I) C.A. No. 3696 of 2005 : The respondent has acted as a sub-broker at the National Stock Exchange with 2 NSE Members, MIS PCS Securities Limited M/s. Zen Securities Ltd. without being registered as a sub-broker with the SEBI with the said Exchange for the period from the years 2000-01, 2001-02 and from April, 2002 to May, 2002 and created the value of Rs. 403.29 crores, in breach of section 12(1) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the "Act") read with rule 3 of the Securities and Exchange Board of India (Stock Brokers Sub-Brokers) Rules, 1992 (hereinafter referred to as the " Rules"). (II) C.A. No. 4640 of 2006 ( SEBI v. Shilpa Stock Brokers (P.) Ltd. M/s. Mehta Vakil Co.) Tribunal has recorded the fair concession of the respondent that the respondent registered as a broker with the SEBI while executing trades on behalf of their client Kamlesh Shroff, had dealt with M/s. Jairam Enterprises, an unregistered sub-broker, which is admittedly in violation of the Circular No. SMD/I POLICY /CIRCULAR/3-97 dated 31-3-1997 issued by SEBI in exercise of powers under section 11 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a stock broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market immediately before the establishment of the Board for which no registration certificate was necessary prior to such establishment, may continue to do so for a period of three months from such establishment or, if he has made an application for such registration within the said period of three months, till the disposal of such application : Provided further that any certificate of registration, obtained immediately before the commencement of the Securities Laws (Amendment) Act, 1995, shall be deemed to have been obtained from the Board in accordance with the regulations providing for such registration. (1A) No depository, participant, custodian of securities, foreign institutional investor, credit rating agency or any other intermediary associated with the securities market as the Board may by notification in this behalf specify, shall buy or sell or deal in securities except under and in accordance with the conditions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time specified therefor in the regulations, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less; ( c )to maintain books of account or records, fails to maintain the same, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less. 15B. Penalty for failure by any person to enter into an agreement with clients. - If any person, who is registered as an intermediary and is required under this Act or any rules or regulations made thereunder to enter into an agreement with his client, fails to enter into such agreement, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less. Rule 3 - No stock broker or sub-broker shall buy, sell, deal in securities, unless he holds a certificate granted by the Board under the Regulations : Provided that such person may continue to buy, sell or deal in securities if he has made an application for such registration till the disposal of such application." "Regulation 25. Liability for contraventio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10. Regulation 25 is the crucial Regulation. Applicable regulations prior to amendment (with effect from 20-11-2003) provide that any contravention of any provision of the Act, Rules and Regulation is to be dealt within the manner provided in regulations 26 to 32 of Regulations prior to amendment with effect from 27-9-2002 and thereafter the regulation 25 of the Regulations prior to amendment with effect from 20-11-2003 provides that any contravention of any provision of the Act, Rules and Regulation is to be dealt with under the 2002 Regulations. 11. As per provisions of regulation 13(1)( a )( iv ) read with regulation 13(4) of the 2002 Regulations, SEBI can impose a minor penalty of suspension of the Certificate of Registration of the concerned Stock Broker or Sub-Broker upto three months and can impose major penalty under regulation 13(1)( b )( i ) of cancellation of the Certificate of Registration and suspension of the Certificate of Registration of the concerned stock Broker or Sub-Broker exceeding three months. From the above provisions, it is clear that in case of contravention of section 12(1) and/or rule 3 of the Rules, the only penalty provided under the Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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