4A Securities Limited vs Sebi

Date of Decision: 04.02.2020

Appeal No. 56 of 2020

4A Securities Limited 109, DLF Tower A, Jasola Vihar, New Delhi- 110 025 ...Appellant Versus National Stock Exchange of India Limited Exchange Plaza, Bandra Kurla Complex, Bandra East, Mumbai- 400 051 ...Respondent

Mr. Amit Gupta, Advocate for the Appellant.

Mr. Rashid Boatwalla, Advocate with Mr. Pruthvi Dhinoja, Advocate i/b MKA & Co. Advocate for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M. T. Joshi, Judicial Member

Per: Justice Tarun Agarwala (Oral)

1.

The present appeal has been filed against the order of the

Member and Core Settlement Guarantee Fund Committee

("MCSGFC") and NSE dated January 14, 2020 wherein the

appellant has been directed to pay a penalty of ` 48,94,000/- and

suspension for 5 trading days in all segments after giving three 2

weeks notice which will start from February 05, 2020 to

February 11, 2020.

2. Having heard the learned counsel for the appellant we find

that the appellant is a member registered with the Stock

Exchange in Capital Market ("CM"), Futures & Options

("F&O) and in the Currency Derivatives ("CD"). Pursuant to an

inspection conducted by the Stock Exchange a show cause

notice was issued for various violations committed by the

appellant. After considering the response and the material

evidence that was collected the impugned order was passed.

3. We find that the noticee had failed to abide by the Code of

Conduct for trading members under Regulations 4.5.1 and 4.5.2

of NSEIL CM and F&O Regulations. The violations ranged

from misuse of client funds, non-availability of client securities,

client obligation met from other client securities, payments

made to clients despite debit balance and misuse of pledging of

client securities. The said violations in our opinion are serious

which justifies the aforesaid penalty and suspension.

4. An attempt was made that during investigation the

inspector officer took certain data by himself without taking

assistance from the appellant's staff and which resulted in 3

incomplete and incorrect data resulting in the issuance of the

show cause notice and the impugned order. Such statement so

made is not based on any documentary evidence such as protest

letters been filed immediately after the inspection nor has been

raised in the response to the show cause notice. Such

contention therefore cannot be taken into consideration.

5. In the light of the aforesaid violations which are serious

we are of the opinion that trading members holding client assets

in their fiduciary capacity has to ensure that all obligations

imposed upon them under the Act and the Regulations are

complied with. We find that the appellant did not act in a

diligent manner. Consequently we do not find any error in the

impugned order. Dismissed.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 04.02.2020 Prepared & Compared By: PK