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TMI Blog2012 (4) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... and Exchange Board of India Act, 1992 (for short the Act). The penalty under section 15HA of ₹ 2 lacs was imposed since the appellant was found to have violated regulations 3 and 4 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (FUTP Regulations). Penalty under section 15 HB of ₹ 1 lac was imposed for breaching the code of conduct prescribed under Securities and Exchange Board of India (Stock Brokers and Subbrokers) Regulations, 1992 (hereinafter referred to as the Broker s Regulation). 3. The background of the case is broadly the following. Securities and Exchange Board of India (for short the Board) conducted investigation in the affairs, trading and dealings in the shares of Oregon Commercial Limited (the company) during the period November 21, 2008 to June 08, 2009. Investigation revealed that the appellant, alongwith a few other stock brokers, placed buy orders on behalf of some of their clients at prices significantly above the last traded price and thereby artificially propped up the price of the scrip for a few days during the investigation period. A show ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... last traded price is no offence and the appellant has not obtained any undue advantage. On the other hand, the appellant had earned only a very meager amount of ₹ 53.47 as brokerage. It is argued that there is no charge of FUTP violations against the promoters and hence the action against the appellant is totally unjust. With reference to the clients with whom the appellant had transactions, it is submitted that charge has been leveled against only 3 clients and this cannot be regarded as aiding and abetting the process of artificial market volumes. The appellants learned counsel would lay emphasis on the fact that the trading related to only 19 shares during a period of 14 trading days and no connection has been established between the appellant and the promoters. The trading was only in respect of one share per day above the last traded price and in respect of this insignificant transaction the appellant cannot be regarded to have provided active assistance in the manipulation of the scrip. Prompt action was taken against Ravindra Singhai, one of the clients/employees, when malpractice was brought to the notice of the appellant and this would reinforce the fact that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng at a price above the last traded price is no offence. However, the pattern of trading in the present case proves that there was a well thought out plan behind the placing of orders by the clients through the appellant. As observed above, the scrip was illiquid and low profile. The financial results of the company had nothing great to be spoken about. The paid up capital of the company was only ₹ 96 lacs consisting of 9,60,000 shares of ₹ 10 each. The highest net profit registered by the company was ₹ 6.5 lacs in March 2009. The value of the scrip at ₹ 874 achieved in June 2009 is to be gauged against the above background. Obviously, an attempt was made to inflate the share price by trading in single shares above the last traded price over a period of time. The adjudicating officer found that during the investigation period there was more buying interest in the scrip than that of selling which is revealed through the quantum of buy and sell orders. He has established that the trading in minimum number of shares per day was for the purpose of setting a new high price so that it would serve as the opening price in the next day and the process continued over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in his account and it (the Noticee) had no role to play in such fraudulent transactions. I am of the view that being a registered market intermediary the Noticee is always under obligation to exercise due diligence and care and ensure that the trades executed through it on behalf of its clients or otherwise, are genuine trades and are not executed to disturb the market equilibrium and to falsely influence the volumes or price of the scrip. 8. The appellant was engaged in knowingly assisting its clients in entering into manipulative trades. To illustrate from March 19, 2009 to April 23, 2009, out of a total of 14 buy orders placed by the appellant 10 were placed before the sell orders were in place in the system. In the case of one of his employees attached to Sagar Branch in Madhya Pradesh, namely, Ravindra Singhai the trades executed on April 17, 20, 22 and 23, 2009 were fictitious/self trades. It is also to be noted that the appellant has filed a police complaint against his own client and employee Ravindra Singhai for manipulation. It has been held in several cases by this Tribunal that self trades are fictitious and reprehensible. Trades, where beneficial ownership is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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