In respect of M/s Bharat J Patel in the matter of trading in the shares of Roofit Industries Limited

WTM/RKA/IVD/17/2012 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: RAJEEV KUMAR AGARWAL, WHOLE TIME MEMBER ORDER UNDER REGULATIONS 28(2) AND 38(2) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (INTERMEDIARIES) REGULATIONS, 2008 AGAINST M/S. BHARAT J PATEL [SEBI REGISTRATION NO. INB 010613015] IN THE MATTER OF TRADING IN THE SHARES OF ROOFIT INDUSTRIES LIMITED Date of hearing: February 07, 2012 Appearance For M/s. Bharat J Patel: 1. Shri Vinay Chauhan, Advocate 2. Shri Bharat J. Patel For the Securities and Exchange Board of India: 1. Shri Suresh Gupta, Chief General Manager 2. Shri Santosh Shukla, Joint Legal Adviser 3. Shri Sabir Sawant, Assistant General Manager 4. Shri T. Vinay Rajneesh, Assistant Legal Adviser

1. Pursuant to the investigations conducted for the periods – October 06, 1999 to December 12, 1999, November 08, 2000 to February 06, 2011 and February 07, 2001 to May 08, 2001 into the dealings in the shares of M/s. Roofit Industries Limited (hereinafter referred to as ‘the company’), SEBI found that certain entities, that were related to each other and to the promoters/directors of the company, have traded in the shares of the company through a set of stock brokers by entering into structured and synchronised deals with each other. M/s. Bharat J Patel (proprietor, Mr. Bharat J. Patel), a stock broker registered with SEBI and a trading member of the Bombay Stock Exchange Limited (‘BSE’), was one such stock broker. 2. After the completion of the investigation, proceedings were initiated against M/s. Bharat J Patel (hereinafter referred to as ‘the noticee’) under the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (since repealed) for alleged contravention of the provisions of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 (hereinafter referred to as ‘the PFUTP Regulations’) and the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 (hereinafter referred to as ‘the Stock Brokers Regulations’).

After repeal of the Enquiry Proceedings Regulations, the proceedings were continued under Chapter V of the SEBI (Intermediaries) Regulations, 2008 (hereinafter referred to as ‘the Intermediaries Regulations’). 3. On completion of the proceedings, the Designated Authority submitted his report dated June 30, 2009 (‘the Report’). Findings and recommendation of the Designated Authority 4. In the Report, the Designated Authority observed that the following entities that were related to each other and to the promoters /directors of the company had traded in the shares of the company through various BSE/NSE stock brokers during the period of investigation : a. Akira Investment Private Limited (Akira), b. Alkan Projects Private Limited (Alkan), c. Habiscus Investments Private Limited (Habiscus), d. Mayfair Paper & Boards Private Limited (Mayfair Paper), e. Mayfair Realtors Private Limited (Mayfair Realtors), f. M'Belle International Private Limited (M'Belle), g. Onlooker Investments Private Limited (Onlooker) and h. Vynex Chemical Engineering Private Limited (Vynex). 5. Out of these entities, Vynex, Mayfair Paper and Mayfair Realtors are promoters of the company and the others are promoter group entities.

The aforesaid entities were in need of funds and they had approached Mr. Deven Mehta (a director in Amgis Holdings Private Limited [AHPL- a trading member of NSE]. Mr Deven Mehta is also a director in Pals Overseas Private Limited (POPL - a trading member of BSE) and is related to M/s. Ami Impex (a client of the noticee). The promoters/ promoter related entities were thereafter introduced by Mr. Deven Mehta to the noticee and other three stock brokers, namely, Goldcrest Capital Markets Limited (a trading member of NSE and BSE), M/s. Prashant J Patel (a trading member of NSE) and Express Securities Private Limited (a trading member of BSE). The noticee has admitted that Mr. Deven Mehta approached it for funds on behalf of promoters/ promoter related entities. 6. The promoters/ promoter related entities delivered the shares of the company in spot transactions to the stock brokers including the noticee in advance and the stock brokers made payments to them much before the pay-out. Those stock brokers in turn immediately sold those shares on the stock exchange through synchronised/matched trades to the promoters/ promoter related entities.

The promoters/ promoter related entities got back their shares by entering into synchronised / matched purchase trades through POLP and AHPL (wherein Mr. Deven Mehta is a director). The cycle of such transactions continued settlement after settlement, during the period of investigation.

7. The noticee (clearing no.763) had traded in the shares of the company in the stock exchange for its three clients, namely, M/s. Ami Impex, M/s. Hinduja Fin Corp and Pat Fin Cons Serv Limited (Pat Fin). Admittedly, Mr. Bharat J Patel (proprietor of the noticee) was a director in Pat Fin during the relevant period. The details of the shares purchased and sold by the noticee for the said clients during the investigation period are as under : A. Total Trades Settlement No. Name of the Client Buy quantity Sell quantity 2001003 Pat Fin 90,000 75,000 2001003 Hinduja Fin Corp 0 90,000 2001004 Hinduja Fin Corp 0 1,20,000 2001005 Pat Fin 0 171500 2001005 Ami Impex 0 13,000 2001006 Pat Fin 0 1,60,000 2001006 Ami Impex 0 10,000 Total 90,000 6,39,500 B. Deals where it was buying as well as selling member - During settlement no.3 (09.04.2011 to 12.04.2001), the noticee (clearing no. 763) had executed following trades where it was both buying and selling member: BUYER MEMBER (noticee) Price (`) Qty Executed SELLER MEMBER (the noticee) Buy Order Ultimate Client Buy Time Sell Order Sell Ultimate Client ID Order Time Order Time ID 9416 Pat Fin 13:31:04 111.00 20,000 13:31:05 13:31:04 0264 Hinduja Fin Corp 9417 Pat Fin 13:41:16 110.05 30,000 13:41:17 13:41:16 0265 Hinduja Fin Corp 9565 Pat Fin 12:03:48 108.00 20,000 12:03:49 12:03:48 0266 Hinduja Fin Corp 9566 Pat Fin 12:04:05 108.00 20,000 12:04:06 12:04:05 0267 Hinduja Fin Corp

Thus, the noticee has been found to have executed cross deals for 90,000 shares of the company in a synchronised manner, while dealing for its clients.

C. Synchronised / Matched Trades. The noticee has been found to have executed synchronised and matched trades for its above mentioned three clients with another stock broker, POPL (clearing no. 314) who was placing buy orders for promoters/promoter related entities in various settlement periods during the investigation period as detailed hereinafter. (i) On April 12, 2001, the noticee was involved in following 3 matched trades with POPL for total 75,000 shares: BUYER MEMBER (POPL) Price (`.) Qty Executed SELLER MEMBER (Noticee) Buy Order Ultimate Order Time Order Time Sell Order Ultimate Clients ID Clients Time ID 3005 Akira 15:15:59 109 25,000 15:16:00 15:15:51 9612 Pat Fin 3006 15:16:25 23,675 15:16:25 Akira 110 15:16:15 9613 Pat Fin 3007 15:16:44 1,325 15:16:44 3008 Akira 15:17:07 110 25,000 15:17:07 15:16:53 9614 Pat Fin (ii) On April 19, 2001 [during Settlement no.04 (16/04/2001 to 20/04/2001)], the noticee was involved in following 5 matched trades with POPL for total 1,20,000 shares:

BUYER MEMBER Price Qty Executed Time SELLER MEMBER (the noticee (POPL) (`) Buy Order Ultimate Clients Order Order Time Sell Order Ultimate ID Time ID Clients Hinduja Fin 3074 Akira 14:14:04 108 25,000 14:14:05 14:14:05 9739 Corp Hinduja Fin 3075 Akira 14:14:26 108.2 25,000 14:14:26 14:14:21 9740 Corp 3076 14:14:48 24,750 14:14:48 Hinduja Fin Akira 108 14:14:48 9741 307 14:15:02 250 14:15:02 Corp Hinduja Fin 3078 Akira 14:15:19 108 25,000 14:15:20 14:15:18 9742 Corp 3080 Akira 14:38:50 108.05 20,000 14:38:50 14:38:47 9743 Hinduja Fin Cor (iii) On April 26, 2001 [during settlement no.5-23/04/2001 to 27/04/2001), the noticee was involved in following 6 matched trades with POPL for a total of 96,000 shares: BUYER MEMBER (POPL) Price Qty Executed SELLER MEMBER (the noticee) Buy Order Ultimate Client Order (`) Time Order Time Sell Ultimate Client ID Time Order ID Akira Invest 10,000 3165 14:26:43 108.4 14:26:43 14:26:43 9895 Pat Fin. Onlookers Invest 15,000 Akira Invest 12,500 3166 Onlookers Invest 14:26:57 108.4 5,000 14:26:58 14:26:58 9896 Pat Fin Mayfair Realtors 7,500 3173 Akira Invest 14:52:26 108.4 25,000 14:52:26 14:52:24 9898 Pat Fin Akira Invest 5,000 3174 14:53:04 108.4 14:53:04 14:53:01 9899 Pat Fin Mayfair Realtors 5,000 Akira Invest 2,800 3175 14:54:33 108.4 14:53:04 14:54:31 9900 Pat Fin Mayfair Realtors 1,200 Akira Invest 3,500 3176 15:15:28 108 15:15:28 15:15:27 9901 Ami Impex Mayfair Realtors 3,500 (iv) On April 27, 2001 [during settlement no.5-23/04/2001 to 27/04/2001), the noticee was involved in following 5 trades with POPL for 85,500 shares: BUYER MEMBER Price Qty Executed SELLER MEMBER Buy Order ID Ultimate Order (`) Time Order Time Sell Order Ultimate Clients Clients Time ID Akira Invest 12,000 3184 13:52:19 108 13:52:20 13:52:14 9908 Pat Fin.

Mayfair Realtors 13,000 Akira Invest 15,000 3185 13:52:41 108.25 13:52:41 13:52:40 9909 Pat Fin Mayfair Realtors 10,000 Akira Invest 15,000 3186 Onlookers Invest 13:53:05 5,970 13:53:05 108.25 13:53:04 9910 Pat Fin 3187 Mayfair Realtors 9,000 Mayfair Realtors 13:53:20 30 13:53:20 Akira Invest 1,250 3188 13:55:36 108 13:55:42 13:55:41 9911 Pat Fin Mayfair Realtors 1,250 Akira Invest 600 3189 14:00:42 108 14:00:42 14:00:40 9912 Ami Impex Mayfair Realtors 2,400 (v) On April 30, 2001, the noticee was involved in following 2 matched trades with POPL for a total of 10,000 shares: BUYER MEMBER Price Qty Executed Time SELLER MEMBER Buy Order ID Ultimate Clients Order (`) Order Time Sell Ultimate Time Order Clients ID 3215 Akira 14:08:53 107.5 5,000 14:08:54 14:08:50 9979 Ami Impex 3216 Akira 14:09:30 107.5 5,000 14:09:31 14:09:16 9980 Ami Impex (vi) On May 04, 2001, the noticee was involved in following 4 matched trades with POPL for a total of 1, 00,000 shares. The said trades were the last trades executed in the scrip on this day:

BUYER MEMBER Price Qty Executed Time SELLER MEMBER Buy Order ID Ultimate Clients Order (`) Order Time Sell Ultimate Time Order Clients ID 3265 11:08:08 24,500 11:08:08 Akira Invest 107 11:07:49 10153 Pat Fin 3266 11:08:54 500 11:08:55 3266 Akira Invest 11:08:54 107 25,000 11:08:55 11:08:52 10154 Pat Fin 3267 Akira Invest 11:09:23 107.25 25,000 11:09:23 11:09:22 10155 Pat Fin 3268 Akira Invest 11:09:43 107.4 25,000 11:09:43 11:09:41 10156 Pat Fin

8. The Designated Authority has found that all the above buy and sell orders were placed within a span of less than two minutes, wherein the quantity, rate and time of placement of orders matched. All the above mentioned trades were synchronised trades. The occurrence of numerous synchronised trades over many days cannot be a coincidence and it is an indication that orders were entered with prior understanding between the trading parties.

9. The stock brokers including the noticee who had made payments to the promoters/ promoter related entities immediately entered into synchronised trades in the stock exchanges so that they could get protection of the Settlement Guarantee Fund (SGF) of the stock exchange, in case of any default. By entering into synchronised / matched deals, the trading parties ensured that the promoters/promoters related entities did not lose control over their shares. The transactions are only financing transactions wherein the return of money to the financier is assured by the availability of the SGF and are not genuine investment trades. The transactions done by the noticee were only with the purpose of recovering the money already paid to the selling entity and to return the shares to the promoters/promoter related entities.

10. The aforesaid transactions have happened only because the trades were placed in synchronised manner between the entities known to each other. If it were not so, it would have been impossible to execute trades for 25,000 to 50,000 shares immediately in a scrip where average daily volume during the investigation period was only around 3000 shares. Such trading volumes were artificial. The trades created a false or misleading appearance of trading which would lead investors into believing in heightened investor interest in the scrip. These trades were mostly financial adjustment trades and not genuine investment trades. 11. In view of the above, the Designated Authority has found the noticee guilty of contravening regulation 4(b) and (d) of the PFUTP Regulations and clauses A(1) and (4) of the Code of Conduct for stock brokers specified in Schedule II read with regulation 7 of the Stock Brokers Regulations. The Designated Authority has recommended that the certificate of registration granted to the notice to act as a stock broker, be suspended for a period of one month. Post Report Notice and hearing. 12. After considering the Report, SEBI issued a show cause notice dated July 2, 2009 (SCN) enclosing therewith a copy of the Report to the noticee and called upon it to show cause as to why action should not be taken as recommended by the Designated Authority or a higher penalty should not be imposed as deemed fit by the Competent Authority. The noticee filed an application for passing of a consent order in terms of SEBI Circular dated April 20, 2007. After the said application was rejected by SEBI, the noticee filed its reply dated January 17, 2012 to the SCN. After seeking adjournment, the noticee was represented in the personal hearing before me on February 7, 2012 when Mr. Vinay Chauhan, Advocate along with Mr. Bharat J. Patel, the proprietor of the noticee appeared and made submissions on behalf of the noticee. The noticee has inter alia made the following submissions in its reply:

(a) The long delay in completion of the proceedings has caused injustice and has resulted in violation of principles of natural justice. (b) The noticee was not aware that the alleged eight entities were trading in the shares of the company. It did not trade even for a single share for the eight entities allegedly related to the promoters of the company. It did not do any proprietary trading in the scrip of the company during the relevant time and had earned only brokerage for the trades done on behalf of its clients. (c) The noticee had traded in the scrip on behalf of M/s. Ami Impex, M/s. Hinduja Fin Corp and Pat Fin Cons Serv Limited (Pat Fin). Its role was limited to that of a stock broker carrying out the instructions of his clients. Those trades were independent based on the instructions of the clients and were executed on the order matching mechanism of the stock exchange at the prevalent market price. (d) If trades were to be synchronised / matched, there would be no reason to have a gap of upto 29 seconds in executing trades. In respect of all sale transactions, it had received delivery of shares in the pool account on behalf of clients and in respect of purchase transactions, it had received funds from the clients and deliveries were made to them.

(e) Simply by placing sell orders at the price, quantity and time indicated by the client, which has matched with the order of counterparty allegedly related to its client cannot lead to any adverse inferences. (f) In absence of any knowledge about its client simultaneously placing corresponding orders through client’s related entity, its trades cannot be questioned and no motives could be attributed; (g) Mr. Deven Mehta in his statement enquired whether Pat Fin could provide him funds against the shares of the company and Pat Fin decided that it could provide him funds against sale of shares. The noticee never stated that it would fund the alleged entities nor did it do so. (h) The fact that the shares were transferred to Pat Fin from the demat accounts of the companies represented by Mr. Deven Mehta establishes that Pat Fin had provided funds against shares and not the noticee in the capacity as a stock broker. (i) The decision to trade in the scrip was that of Pat Fin and was not its decision and it is incorrect to state that just by virtue of being a director in Pat Fin, the noticee took the decision.

(j) There was nothing in the trading behaviour of the clients to excite suspicion as to something amiss in their trading pattern. (k) In the matter of Sunearth Ceramics Limited, wherein the same facts as in present case were involved, SEBI in its Order dated February 1, 2010 observed that the stock broker therein had no manipulative intent and was merely executing orders on behalf of clients and only warning was issued to the stock broker. (l) It had not violated the provisions of PFUTP Regulations and code of conduct and hence no action is warranted. 13. During hearing before me the learned advocate of the noticee submitted that the matter is more than 11 years old and even the SCN in these proceedings was issued on July 02, 2009. The long delay in completion of these proceedings has caused grave injustice to it and resulted in gross violation of the principles of natural justice. Citing the observations of the Hon’ble SAT in the matters of Libord Finance Ltd. vs. SEBI and Shri Ashok K Chaudhary vs. SEBI, he submitted that due to the long delay any action against the noticee at this stage would not serve any purpose and would not help anyone besides depriving the noticee of its right to defend against the action proposed to be taken.

He further submitted that all the trades done by the noticee were for its clients and that SEBI did not take any action against the clients. He also submitted that in the investigation report, the number as also the frequency of transactions executed by the noticee, as compared to the market volume, was found to be minimal. The Investigating Authority had, therefore, recommended that directions under section 11D of the SEBI Act may be issued against the noticee to cease and desist from entering into such transactions. However, in the same facts and circumstances, the Designated Authority in his Report has made different recommendation to impose a penalty of suspension for a period of one month. The learned advocate requested that in view of such mitigating factors, a lenient view may be taken and the penalty as recommended by the Designated Authority against the noticee be reduced to a warning. 14. It its reply to the SCN the noticee had sought for cross examination of its clients and promoters/directors of the company. The notice did not press this request during hearing. In my view, since the statements of these persons are not relied upon in the proceedings before me, their cross-examination by the noticee is not required.

Consideration of the Issues: 15. I have considered the Report, the oral as well as written submissions of the noticee and other relevant material available on record. Before dealing with the issues involved in the matter, it is necessary to refer to the relevant regulations the contravention of which has been charged in the SCN and Report. The said regulations are reproduced hereunder :- PFUTP REGULATIONS “Prohibition against market manipulation. 4. No person shall - (a) …. (b) indulge in any act, which is calculated to create a false or misleading appearance of trading on the securities market (c) ….. (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. ….. (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 in excessive speculative business in the market beyond reasonable levels not commensurate with his financial soundness.” 16. The noticee has admitted its trades as found in the Report and described hereinabove. According to the noticee it had placed sell orders at the price, quantity and time indicated by its clients and those orders matched with orders of counter party in the order matching system of the stock exchange and those trades were not synchronised/structured. I find that the above mentioned sell orders of the noticee matched with the buy orders of only one counterparty stock broker i.e. POPL (who was trading on behalf of the promoters/promoter related entities). Placing of the sell orders with same counter parties for same quantity of shares at the same price within nil or too negligible time difference repeatedly over a period of time are clear indication that those trades of the noticee were synchronised / structured. In this regard, the following observations of the Hon’ble SAT in its order dated July 14, 2006 in the matter of Ketan Parekh vs. Securities and Exchange Board of India, is worth mentioning :

“The word ‘synchronise’ according to the Oxford dictionary means “cause to occur at the same time; be simultaneous”. A synchronised trade is one where the buyer and seller enter the quantity and price of the shares they wish to transact at substantially the same time. This could be done through the same broker (termed a cross deal) or through two different brokers.Every buy and sell order has to match before the deal can go through. This matching may take place through the stock exchange mechanism or off market. When it matches through the stock exchange, it may or may not be a synchronised deal depending on the time when the buy and sell orders are placed. ……………….. It would, therefore, follow that a synchronised trade or a trade that matches off market is per se not illegal. Merely because a trade was crossed on the floor of the stock exchange with the buyer and seller entering the price at which they intended to buy and sell respectively, the transaction does not become illegal. A synchronized transaction even on the trading screen between genuine parties who intend to transfer beneficial interest in the trading stock and who undertake the transaction only for that purpose and not for rigging the market is not illegal and cannot violate the regulations.

As already observed ‘synchronisation’ or a negotiated deal ipso facto is not illegal. A synchronised transaction will, however, be illegal or violative of the Regulations if it is executed with a view to manipulate the market or if it results in circular trading or is dubious in nature and is executed with a view to avoid regulatory detection or does not involve change of beneficial ownership or is executed to create false volumes resulting in upsetting the market equilibrium. Any transaction executed with the intention to defeat the market mechanism whether negotiated or not would be illegal. Whether a transaction has been executed with the intention to manipulate the market or defeat its mechanism will depend upon the intention of the parties which could be inferred from the attending circumstances because direct evidence in such cases may not be available. The nature of the transaction executed, the frequency with which such transactions are undertaken, the value of the transactions, whether they involve circular trading and whether there is real change of beneficial ownership, the conditions then prevailing in the market are some of the factors which go to show the intention of the parties.

This list of factors, in the very nature of things, cannot be exhaustive. Any one factor may or may not be decisive and it is from the cumulative effect of these that an inference will have to be drawn.”

17. I further note that in the appeal filed by POPL (counterparty to the noticee) against SEBI Order dated July 31, 2007 which dealt the above mentioned synchronised trades of the noticee also, the Hon’ble SAT vide its Order dated December 27, 2010 inter alia observed as follows:

“……..While we agree with the learned counsel for the appellant that the trading system maintains complete anonymity and the brokers while placing orders (buy or sell) do not know at the time of executing the trade as to who the counter party is or even the counter party broker, but despite anonymity, market players and intermediaries like the brokers execute manipulative trades by defeating the system and this is usually done by placing the buy and sell orders simultaneously for the same amount and at the same price. Such trades are commonly called matched trades, that is, trades which are matched by / through the brokers and not by the system. The possibility of such trades is far greater in scrips which are comparatively less liquid because of the low frequency of the trades. .…… In the absence of prior meeting of minds and knowing the mechanism of the trading system, matching trades as aforesaid cannot be too frequent an occurrence and can lead to only one conclusion that the trades had been manipulated by misusing the system. Normally, no direct evidence would be available to find out whether a broker was aware of the matching trades. The intention of the parties and the brokers will have to be gathered from the surrounding circumstances looking at the trading pattern, the frequency of trades and other related circumstances.”

18. In view of the above, I do not agree with the contentions of the noticee and hold that the above mentioned trades of the noticee were synchronised / structured. 19. I note that in their joint statement recorded on February 6, 2003 during the investigations, Mr. Bharat J. Patel (the proprietor of the noticee) and Mr. Prashant J. Patel (proprietor of M/s. Prashant J. Patel-another stock broker and member of NSE and who had also traded in the scrip) had explained the transactions on oath as under- • “Mr. Deven Mehta of M/s. Ami Impex approached Shri Bharat J. Patel, Director of M/s. Pat Fin stating that he was representing his investment companies viz. M/s. M’Belle International, M/s. Onlooker, M/s. Akira and M/s. Mayfair and that these investment companies had a block of shares of M/s. Roofit and that he was in need of funds and whether we could provide him funds against these shares. M/s. Pat Fin had liquidity at that point of time and we felt that we could fund him against the sale of shares of M/s. Roofit”. • “From April 9, 2001 onwards till May 2001, shares of M/s. Roofit were transferred from the accounts of the investment companies represented by Mr. Deven Mehta to the account of M/s. Pat Fin (where Mr. Bharat J Patel is the director) and M/s. Superior Financial Consultancy Services Pvt. Ltd. (where Mr. Bharat J Patel is the director).” • ”Immediately on receipt of the shares from the investment companies of Mr. Deven Mehta, payment was being made by M/s. Pat Fin to these investment companies but mainly to M’Belle.

The cheques for these payments were being collected by Mr. Deven Mehta. These transactions were in the nature of a spot transaction” • “On receipt of the shares by M/s. Pat Fin and by M/s. Superior on the request of M/s. Pat Fin, sale transactions were effected through the terminal of M/s. Bharat J Patel and M/s. Prashant J Patel, as per the order instructions given by Mr. Deven Mehta”. 20. I also note from the aforesaid statements that the noticee was aware of the relationship between M/s. Ami Impex and Mr. Deven Mehta and that Mr. Bharat J Patel was a director in Pat Fin during the relevant point in time. The above statement taken together with the above stated synchronised/structured trades of the noticee, clearly establish that the noticee was fully aware and was actively involved in the financial adjustment trades which were not genuine investment trades, as found by the Designated Authority in the Report. I, therefore, am not convinced with the contention of the noticee in this regard.

21. As found during investigations and also by the Designated Authority in these proceedings, in the whole scheme, the promoters / promoter related entities transferred their shares through off market spot transactions to the stock brokers (including the noticee) and their related entities (Pat Fin with respect to the noticee) for receiving finance and thereafter received back those shares (in the market transactions through the above stated synchronised / structured trades). Thus, there was no change in the beneficial ownership of the shares. In view of these findings, I am of the view that the trades of the noticee were not genuine and have been executed in the stock exchange for an ulterior purpose. Further, the noticee by indulging in such non-genuine trades has also created a false and misleading appearance of trading for the shares of the company during the investigation period. Even if it is assumed that the deliveries were made by the noticee as claimed, it will not help the case of the noticee as it was involved in the above said non-genuine transactions. Further, while indulging in those trades the noticee failed to maintain the high standards of integrity expected of it in the conduct of its stock broking business. I, therefore, find that the noticee has contravened the provisions of regulation 4(b) and (d) of the PFUTP Regulations and Clause A (1) and (4) of the Code of Conduct specified for the stock brokers under the Stock Brokers Regulations.

22. I note that in the matter of Sunearth Ceramics Limited, the only charge against the stock broker was violation of Clause A (2) of the Code of Conduct for stock brokers as specified in the Stock Brokers Regulations whereas in the present case the charge against the noticee is violation of the Code of Conduct as well as the violation of PFUTP Regulations. In my view, every case has to be considered in the light of specific facts and circumstances of each case. Even a small difference in the facts and circumstances may give a different result. Therefore, I am not inclined to agree with the arguments made on behalf of the noticee in this regard.

23. I note from the records that the proceedings before the Designated Authority were prolonged due to inordinate delay on the part of noticee in submitting reply to the show cause notice and its numerous requests for adjournment of date of hearing. The noticee had also sought postponement of proceedings on numerous occasions during the pre and post-enquiry stage. The noticee had filed application for consent order in the matter after the post-enquiry notice was issued to it. Thus, I find that there has been no wanton delay on the part of SEBI in the matter. The noticee was aware of the proceedings and the charges / allegations levelled against it at different stages and it had itself contributed to the delay in disposal of this case. I, therefore, do not agree that the principles of natural justice are violated in this case. I also note that the recommendations, if any, of the Investigating Authority on the nature of penalty is not binding on the Designated Authority.

24. I have also considered the other mitigating factors submitted by learned advocate of the noticee. Having regard to those mitigating factors and the facts and circumstances of the case, I am of the view that suspension of the certificate of registration of the noticee for a period of one week would be commensurate with the contraventions found in this matter.

25. I, therefore, in exercise of the powers conferred upon me by virtue of section 19 of the Securities and Exchange Board of India Act, 1992 read with regulation 28(2) and 38(2) of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, hereby suspend the certificate of registration of the stock broker, M/s. Bharat J. Patel (SEBI Registration No. 010613015], trading member of the Bombay Stock Exchange Limited, for a period of one week.

26. This order shall come into force immediately on expiry of twenty one days from the date of this order. 27. A copy of this Order shall also be forwarded to BSE.

Date: April 24, 2012 RAJEEV KUMAR AGARWAL Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA