TMI Blog2017 (5) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by the clients did not fructify because they were at far away prices very fact that orders were placed at far away prices is sufficient to give a false picture to the investors in the scrip. Therefore the argument of the appellant that non- fructified orders do not impact the market and as long as the orders are within the range of the circuit filters there is no abnormality in placing the orders cannot be accepted. Where the orders are found to have been placed at far away prices to manipulate the market then it would amount to violating the PFUTP Regulations. In the instant case, inference drawn by the WTM of SEBI that placing high quantity orders repeatedly at prices far away from the market prices constituted violation of PFUTP Regulations cannot be faulted. Above inference is further fortified by the fact that there were synchronised trading of large quantities. We also note that the enquiry officer had recommended suspension of the licence of the appellant for a period of 2 years while the WTM of SEBI has ordered suspension of certificate for a period of only one month. - Appeal No.283 of 2015 - - - Dated:- 8-3-2017 - J.P. Devadhar and Dr. C.K.G. Nair, JJ. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the appellant for the alleged violations of dealing in the scrip of SRMTL during June, 2000 to September, 2000 under the provisions of the Securities and Exchange Board of India Act, 1992 ( SEBI Act for short) and SEBI (PFUTP) Regulations. Show cause notice also contained the findings of the investigation report as well as statements made by Shri Rajnish Rangari, authorised representative of the appellant who appeared before the investigating officer of SEBI in the matter. The appellant replied to the show cause notice on March 8, 2004. On August 30, 2006 the appellant received another show cause notice alongwith a copy of the enquiry report issued under the SEBI (Procedure for Holding Enquiry and Imposing Penalty) Regulations, 2002 whereby the enquiry officer had recommended a major penalty of suspending the certificate of registration granted to the appellant for a period of 2 years. The appellant replied to the show cause notice on October 17, 2006. c) On May 13, 2015 the impugned order was passed by the Whole Time Member of SEBI suspending the certificate of registration of the appellant as a stock broker in the NSE for a period of one month for violation of Regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any act which results in reflection of prices of securities based on transactions that are not genuine trade transactions; (d) enter into purchase or sale of any securities, not intended to effect transfer of beneficial ownership but intended to operate only as a device to inflate, depress or cause fluctuations in the market price of securities .. CODE OF CONDUCT UNDER THE STOCK BROKERS REGULATIONS A. General (1) Integrity: A stock-broker, shall maintain high standards of integrity, promptitude and fairness in the conduct of all his business. (2) Exercise of due skill and care: A stock-broker shall act with due skill, care and diligence in the conduct of all his business. (3) Manipulation: A stock-broker shall not indulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumours with a view to distorting market equilibrium or making personal gains. (4) Malpractices: A stock-broker shall not create false market either singly or in concert with others or indulge in any act detrimental to the investors' interest or which leads to interference with the fair and smooth functioning of the market. A stock-broker shall not involve himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the SRMTL shares but did not advice sell but the clients have still sold the shares. It was argued that buy recommendation is not a recommendation to hold the shares forever. Different clients would sell their shares at a price and time of their choice depending on their own expectations and funding/finance requirement etc. vi) On the charge that the appellant s clients placed orders at far away prices from those of the prevailing market prices it was argued that the price at which orders were placed were within the applicable range and when large quantities are to be sold/bought quoting such high/low price is a usual trading practice. Nothing more has to be read into such trading practices particularly in the present context with all buying clients paid for and took delivery of the shares and selling clients gave delivery and took the money and therefore all transactions were legal and not manipulative. vii) On the issue of synchronised trading with UTI it was argued that UTI was not a client of the appellant and no information relating to UTI entering the market was available to the appellant. Without such information no synchronised trading was possible. It was also arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... She had even traded ₹ 60 crore worth of securities in certain financial years and as such payment due of a crore or two for a few days is not a matter of concern or undue risk from the point of view of the broker. It was also emphasised that during the time of the impugned matter settlement was on T + 5 basis unlike the current T + 2 period. xii) On the issue of short term loan of ₹ 1 crore received from SRMTL it was argued that it was only a loan for tiding over a temporary liquidity position which was duly repaid with interest and the appellant produced audited accounts and letter as evidence for repayment stating SEBI never sought for any further document in this regard. Since such temporary bridge loan was a normal business practice nothing much needs to be read on this transaction. 6. Shri Kumar Desai, learned counsel for the respondent, while reiterating the contentions in the impugned order argued that while cross deals may not be bad in law once placed on the trading platform of the exchanges it should not be done with the intention to manipulate the market. In the instant case, placing considerable number of orders at prices very far from the ruling marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08/08/2000 13:09:47 200008080565080 6764* 6153 S 30000 73.80 68 13/09/2000 14:53:03 200009130915792 8155** 4611 S 30000 92.75 80 11/09/2000 11:04:22 200009110352669 6000 CLI S 25000 96.00 89 11/09/2000 11:04:38 200009110353702 6000 CLI S 25000 95.90 89 12/09/2000 13:39:57 200009120667729 6000 CLI S 25000 94.40 92 18/09/2000 11:16:02 200009180332810 6000 CLI S 25000 89.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEBI suspending the license of the party therein was not appealed against and in the latter case vide order dated 31.7.2007 this Tribunal upheld the orders passed by SEBI. Therefore, in all these matters the orders passed by SEBI have attained finality. As such same/similar charges against the appellant in the instant matter have been already proved and substantiated. On synchronised dealings with the UTI orders it is admitted before the investigating officer that the appellant was aware of the existence of a buyer for 2 lakh shares of SRMTL at a higher price than the price expected by two of their clients. The authorised representative of the appellant had admitted before the investigating officer of SEBI that there was a buyer for 200000 shares of SRMTL at a higher price than the price expected by two of our clients . Accordingly, the appellant entered into a sell order of ₹ 2.05 lakhs at the same rate of ₹ 82.50 at 12:58:16 one second before the UTI order for buying 2 lakh shares was placed by their broker on 15.9.2000. The charge is against the appellant in executing the trade in a synchronised fashion and the charge is not against the UTI or broker who placed a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the clients did not fructify because they were at far away prices very fact that orders were placed at far away prices is sufficient to give a false picture to the investors in the scrip. Therefore the argument of the appellant that non- fructified orders do not impact the market and as long as the orders are within the range of the circuit filters there is no abnormality in placing the orders cannot be accepted. Where the orders are found to have been placed at far away prices to manipulate the market then it would amount to violating the PFUTP Regulations. In the instant case, inference drawn by the WTM of SEBI that placing high quantity orders repeatedly at prices far away from the market prices constituted violation of PFUTP Regulations cannot be faulted. Above inference is further fortified by the fact that there were synchronised trading of large quantities. We also note that the enquiry officer had recommended suspension of the licence of the appellant for a period of 2 years while the WTM of SEBI has ordered suspension of certificate for a period of only one month. 13. Counsel for the appellant sought to distinguish the decision of this Tribunal in the case of Magnum Eq ..... X X X X Extracts X X X X X X X X Extracts X X X X
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