9911796707
TMI Blog2012 (5) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... pany is a stock broker having its registered office at Mumbai. It is said to be doing proprietary trading from 2 locations through 19 terminals in Mumbai. The terminals are operated by jobbers authorized by the appellant. It traded in the scrip of Edserv Softsystems Ltd. (the company) on the first day of its listing on March 2, 2009 and for a few days thereafter. Since price of the scrip saw an upward movement, the Bombay Stock Exchange Ltd. and the National Stock Exchange of India Ltd. carried out investigations for the period from March 02 06, 2009 and March 02 09, 2009 respectively into the trading of the scrip. Subsequently, the Securities and Exchange Board of India (the Board) also carried out investigations and noted that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2860 HJSL (Own) 28,33,872 8.31 110.56 28,33,872 8.31 110.62 0 2011 1206 MEPL (Own) 21,30,360 6.25 106.60 21,30,360 6.25 106.60 0 1607 868 Total 1,13,80,948 33.37 1,13,80,948 33.37 0 The summary of the alleged fictitious trades, as executed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing activity. There was no cross connection in putting the buy and sell orders. The jobbers placed orders from their terminal and they had no knowledge for orders placed by other jobbers at different terminals. In some cases, the buy order of the same quantity placed by one jobber matched at the same time with the sell order by another jobber and the order got executed through online trading process. There was no intention to execute fictitious trades. All the trades executed by the appellant were proprietary in nature and the appellant had no connection either with the promoters or directors of the company. The alleged fictitious self trades which matched on the day of listing are only to the extent of 0.59% of the total traded quantity on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge containing instructions regarding pro-account trading. The said instructions, issued in 2003, inter alia, provide that in case any member-broker requires the facility of using own account through trading terminals from more than one location, such memberbroker shall be required to submit an undertaking to the BSE stating the reason for using the own account at multiple locations and the Exchange may, on case to case basis after due diligence, consider extending the facility of allowing use of own account from more than one location. It is the case of the appellant that vide letter dated April 24, 2009 (copy placed on record), the appellant had furnished details of the terminals from where the appellant wished to avail of the facility of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sharing profit which does not fall within the scheme of pro-account trading. A similar modality has been adopted by some other brokers too which has resulted in the manipulation of the scrip. If such a trading is allowed in pro-account through various terminals to the brokers, the possibility of a large number of self trades being executed and giving a wrong impression about the trading of the scrip in the market to lay investors is not ruled out. Such an arrangement cannot be permitted as it breaches the regulatory framework established by the Board. 6. We have considered the rival submissions and are inclined to agree with the view expressed by learned counsel for the Board. The modus-operandi of the appellant in operating through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the impugned order which has held the appellant guilty of violating the provisions of FUTP regulations as well as code of conduct for the stock brokers. We are, therefore, not inclined to interfere in the matter. 7. It was then argued by learned counsel for the appellant that penalty imposed under section 15 HA and 15 HB of the Act is grossly unreasonable and it does not have any nexus with the purported gravity of the charge of fictitious / self trades in the scrip of the company. The appellant is a stock broker and he understands the implication of his actions well. Self trades, which implies the trades in which both buyer and seller are the same party and does not result in change of beneficial ownership are fictitious in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X
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