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TMI Blog2005 (9) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... nal vide its order dated 14/02/2005 on finding the balance convenience would be to stay the impugned order pending appeal, granted interim order by staying the impugned order pending appeal. 4. The brief facts of the case is as follows: 5. SEBI had conducted an investigation into the dealings in the scrip of Moschip Semiconductors Limited ('Moschip' for short) for the period 7/05/2001 to 31/05/2001 when there was an initial rise in the price of the scrip during the above mentioned period. It was found from the investigation that Cholamandalam Securities Limited, the appellant, had bought 12,625 shares and sold 1,000 shares on behalf of Mr. B. Jayaprakash over a period of 3-4 days in May and June, 2001. 6. On the basis of the investigation report SEBI conducted an enquiry under Regulation 4(a) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide its order dated 24/09/2003 who enquired into the alleged violations committed by the appellant, who is a member of Stock Exchange, Mumbai in respect of their dealing in Moschip. The Enquiry Officer in his findings stated: (a) Cholamandalam accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning. It was also submitted by the appellant that the mitigating factors may be considered while taking a view in the matter: (i) Impeccable track record; (j) No action taken by any regulatory body including SEBI and NSE till date. (k) No funding or financing done by them for alleged manipulation by Mr. Jayaprakash. (l) No prejudice has been caused to any investors in the market; and (m) The transactions done by Mr. Jayaprakash through them constituted only 0.01% of the total turnover of the company that year. 9. While passing the order dated 27/01/2005, the Chairman, SEBI took note of the finding of investigation report, show cause notice, the finding of enquiry report, reply and written submissions submitted by the appellant. It was mentioned in the impugned order that the price of Moschip had increased from ₹ 25.80 on May 7, 2001 to ₹ 50.85 on May 31, 2001. It was pointed out in the order that M/s. Vijay Growth Financial Services (for short 'VGFL') through Jayaprakash were found to be trading substantially in Moschip. It was also found that B. Jayaprakash, who was an employee of VGFL and VGFL itself were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual income of ₹ 3 lakhs in the client registration form but he was allowed to trade in the scrip of Moschip to the tune of ₹ 6.75 lakhs in a single month. The impugned order further mentioned that a broker was an important intermediary in the capital market who had an obligation to carry out the business in such a manner that safety and integrity of the market could be maintained. It was not the charge that the appellant had violated any of the SEBI circular, but the conduct expected from it as a registered intermediary was not being delivered. In view of the above, it is mentioned in the impugned order that the appellant thus violated Clause A(2) of Schedule II of SEBI (Stock Broker and Sub-Broker) Regulations, 1992. 12. The learned Senior Counsel for the appellant submitted that the impugned order deserved to be set aside in view of the fact that by accepting three cheques from third parties in May/June, 2001 there was no violation by the appellant of the laws or circulars of the respondent. SEBI circular prohibiting the acceptance of third party cheque is of August, 2003 whereas these transactions took place in the month of May/June, 2001. 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a part of well reputed financial group of South and its record had been impeccable so far and it would damage its reputation if such an order was passed against it. He therefore submitted that the impugned order should be set aside. 15. The learned counsel for the respondent argued that the impugned order had been passed after conducting an investigation and also an enquiry by the Enquiry Officer. The appellant was given full opportunity to place his view point. He argued that it was agreed by all that there was an initial price rise in the scrip of Moschip during 7/05/2001 to 31/07/2001 when two entities M/s. VGFL and Mr. B. Jayaprakash were found to have traded substantially in the scrip of Moschip. He also pointed out that M/s. Cholamandalam Securities accepted cheques issued by VGFL for payment against shares bought by Mr. Jayaprakash . The appellant accepted orders on behalf of Jayaprakash for ₹ 6.19 lakhs shares of Moschip whereas his annual income was ₹ 3 lakhs. Since Jayaprakash and VGFL were involved in the initial price rise in the scrip of Moschip, it was essential that the appellant should have exercised prudence and care in allowing Jayaprakash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplaint register not maintained. Client account were used for other purposes Margin money not collected In 10 cases, deals were done outside the NEAT System Order Irregularities are basically technical lapses and do not deserve a substantive punishment. Minor Penalty - Warning b) M/s. J.M. Morgan Stanley Retail Services Pvt. Ltd. Irregularities Failure to obtain client registration forms and agreement Failed to maintain separate client account. Order Warning M/s. Bama Securities Irregularities Contract notes were missing Acknowledgement from the clients not obtained Not maintaining client registration forms Order Warning Reliance has been placed on a few other judgments as under in which similar irregularities were found and were served with a letter of warning. d) M/s. Ratanbali Capital Markets Ltd. Irregularities Non-maintenance of books of accounts Contract notes Non-collection of margins from clients Misuse of client's funds Share len ..... X X X X Extracts X X X X X X X X Extracts X X X X
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