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2015 (10) TMI 1717 - SECURITIES APPELLATE TRIBUNAL MUMBAI

2015 (10) TMI 1717 - SECURITIES APPELLATE TRIBUNAL MUMBAI - TMI - Penalty for Violation of SEBI Circular read with Clause A(2) of the Code of Conduct; Regulation 15 of Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 Whether 4 terminals, out of terminals granted, at 3 locations were allotted to ultimate clients in contravention to said regulations? Held That:- Terminals under issue not managed by authorized employee or by sub-broker himself - Appellant .....

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mpugned Order dated 30th June, 2014 passed by the Respondent by which penalty of ₹ 3 lac has been imposed on the Appellant for violation of Securities and Exchange Board of India ( SEBI ) Circular dated 22nd October, 2001 read with Clause A(2) of the Code of Conduct as prescribed under Schedule II, Regulation 15 of Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 (for short Stock Brokers and Sub-Brokers Regulations, 1992 ). 2. Briefly stated the fact .....

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t of its business as prescribed by the Code of Conduct under the Stock Brokers and Sub-Brokers Regulations, 1992 along with the provisions of SEBI Circular dated 22nd October, 2001. SEBI accordingly appointed an Adjudicating Officer to conduct detailed enquiry into the matter as per the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 and adjudge under Section 15HB of the SEBI Act, 1992. Accordingly, a show-cause notice dated 18th October, 2013 was .....

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to the ultimate clients in contravention of SEBI Circular dated 22nd October, 2001 thereby violating the provisions of the Code of Conduct and the Regulations in question. 4. The learned counsel for the Appellant, Shri Prakash Shah, vehemently argued that 4 terminals at 3 locations in dispute were being run by the professionals who were appointed on contract basis and there was no bar in having terminals fixed at other locations. 5. We have heard learned counsel for the parties at length and pe .....

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be to have proper control over the terminals for regulation purposes and it should be within the knowledge of the Stock Exchange as well as SEBI that the terminals are being run at the office of the broker or its branch office or at the registered sub-broker s office. No other place is authorized to have a trading terminal. The relevant portion of the said Circular dated 22nd October, 2001 is reproduced hereinbelow for facility of reference: Grant of trading terminals It has further come to the .....

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against the broker who mis-utilises or lets misutilisation of their trading terminals of unregistered sub-broking activities. Stock Exchanges are also advised to amend their bye-laws suitably to prohibit their members from dealing with sub-brokers who are not registered with SEBI. 6. We find from the contents of the show-cause notice and the impugned order that crux of the allegations against the Appellant is that he allotted trading terminals to the ultimate clients, which is prohibited by SEB .....

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s that the trading terminals shall be required to be under the direct control of the trading member and be managed either by an authorized employee or by a registered sub-broker of the trading member. In the present case, admittedly, the 4 terminals at 3 locations in dispute were managed by a consultants/persons engaged on contract basis and not by authorized employee or by the sub-broker himself. 7. Turning to the point urged by Shri Prakash Shah that the penalty is unjustified and any minor pu .....

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tices relating to securities, shall be liable to a penalty of twenty-five crore rupees or three times the amount of profits made out of such practices, whichever is higher. It is noted that no quantifiable figures are available to assess the disproportionate gain or unfair advantage made as a result of such non-compliance by the Noticee. Further from the material available on record, it is not possible to ascertain the exact monetary loss to the investors on account of non-compliance by the Noti .....

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