TMI Blog2019 (11) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... ient codes given in the contract notes are just reference codes in the absence of SEBI identifying those clients. When BGSPL was only one client and its unique client code was used there was no requirement for using other reference codes. Therefore, we do not find any fault in the finding in the impugned order that the appellant was using the services of unregistered sub brokers or some of its clients were actually discharging functions of sub brokers without SEBI registration . Whether BGSPL or some other such entities got the registration for sub broker-ship later is not germane to the matter because what is relevant is whether they were certified sub brokers at the relevant time. Therefore, given these major violations we do not find any fault in penalizing the appellant with an order of suspension. Time frame is very important while judging gravity of offences across time and in doing justice. We also agree with the submissions of the appellant that a long period of suspension of a market intermediary like a broker would make them completely defunct which, in the given context would make the punishment disproportionate. At the same time we do not agree with the submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y) Regulations, 2002 and a show cause notice issued on June 19, 2006. The appellant submitted its reply to the show cause notice on October 24, 2006. Thereafter, a personal hearing was granted and held on December 9, 2010 which was attended by the appellant. ( c) Since the appellant is a broker, under Regulation 27 of the SEBI (Intermediaries) Regulations, 2008 ( Intermediaries Regulations for short) a Designated Authority ( DA for short) was appointed who submitted the enquiry report on October 21, 2011. This enquiry report, inter alia, found multiple violations of SEBI Act, Rules, Regulations and Circulars and therefore recommended suspension of the appellant s registration for a period of five years. A postenquiry show cause notice was issued to the appellant on November 22, 2011 along with a copy of the enquiry report. The appellant was also provided an opportunity of personal hearing. The appellant sought multiple extensions for both filing reply as well as for personal hearing which was granted and after this process was completed the impugned order was passed by the WTM thereby suspending the registration of the appellant for a period of one year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed since about 2005. Therefore, it was wrong to allege that there was mismatch between the trade logs in the books of account of the appellant as well as stock exchange data. The diaries / manual registers found in the premises were also not of the appellant. 4. Further, on the allegation of not separating or intermingling appellant s own account with client accounts and thereby violating SEBI circular dated November 18, 1993 the learned senior counsel contended that these payments were paid from appellant s own account for various services rendered by some people (not clients), such as consultancy services, VSAT installation etc. Further, on delay reportedly in crediting dividend to the client accounts is only that of a few days which was needed for operationalising the same and there is no client complaint in this regard. Similarly, the margin shortfall alleged to be made in the cash segment by the appellant is a very small amount of ₹ 62853.75 during the entire period while because of the typographical error in the impugned order it is shown as ₹ 6285375 and sufficient margin was available with the appellant. Since sufficient margin money was availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. We have heard Shri Pradeep Sancheti, learned senior counsel for the respondent. He submitted that suspension of the license is different from cancellation of the license and while the DA recommended five years suspension the WTM, after considering all the mitigating factors and circumstances, has reduced it to a one year period. He further contended that the orders relied on by the appellant are distinguishable as the violations committed by the appellant are of much serious nature and therefore cannot be let off with warning. He further submitted that with respect to BGSPL working as a sub broker before giving license to do so the appellant misguided SEBI in stating that he is the landlord while the lease agreement has been signed by the appellant and one Shri Vasant Sharma, who is stated to be the landlord. Similarly, on account codes mismatch details relating to 192 such clients are on record in Volume-I of the appeal memo. Effectively, the appellant was using a system of unauthorized sub broker which is a serious offence. 8. On a detailed hearing of the matter and perusal of all the records we feel that the contentions of the appellant are more in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and market dynamics many of the violations of the past era would look magnified now. The instant violations in 2005 therefore would look very serious when compared with the practices in 2015 as a decade of development in the securities / financial markets coupled with drastic innovations in technology would make earlier practices very crude. Therefore, the time frame is very important while judging gravity of offences across time and in doing justice. We also agree with the submissions of the appellant that a long period of suspension of a market intermediary like a broker would make them completely defunct which, in the given context would make the punishment disproportionate. At the same time we do not agree with the submission that a warning would suffice since utilizing unauthorized sub-broker type dealing by a broker is a serious offence irrespective of the vintage of the offence. Balancing all these factors and circumstances into account we are of the view that a complete suspension of the appellant for a period of one year may not do full justice. Therefore, we modify the order of one year suspension of the appellant to that of one year restriction from taking any fresh clie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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