M/S. J V Stock Broking Pvt. Ltd. vs Sebi

DATE : 25.02.2016

Appeal No. 249 of 2015

M/s. SPFL Securities Ltd. 3/4267, Ansari Road, Darya Ganj, New Delhi - 110002. ..... Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ...... Respondent

With Appeal No. 250 of 2015

M/s. J V Stock Broking Pvt. Ltd. 121, Padam Tower II, 14/113, Civil Lines, Kanpur - 208 001. ..... Appellant

Versus

Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ...... Respondent

Mr. Ankur Kumar, Advocate for the Appellants. Mr. Kumar Desai, Advocate with Mr. Tomu Francis, Advocate for the Respondent.

CORAM : Justice J. P. Devadhar, Presiding Officer Jog Singh, Member

Per : Justice J. P. Devadhar (Oral)

1.

By a common order dated March 12, 2015 the adjudicating officer

of SEBI has imposed penalty of ` 25 lakh on M/s. SPFL Securities Ltd.

(Appellant in Appeal No. 249 of 2015) under Section 15HB of the

Securities and Exchange Board of India Act, 1992 ('SEBI Act' for short) 2

for violating clause A(2) of Code of Conduct for Stock Brokers as specified

under Schedule II read with Regulation 7 of the Stockbrokers Regulations

and imposed penalty of ` 25 lakh on M/s. J. V. Stock Broking Pvt. Ltd.

(Appellant in Appeal No. 250 of 2015) under Section 15HA of SEBI Act

for violating Regulations 3(a), (b), (c), (d), 4(1), 4(2)(a) and (g) of the

Securities and Exchange Board of India (Prohibition of Fraudulent and

Unfair Trade Practices relating to Securities Market) Regulations, 2003

('PFUTP Regulations' for short). Since, both appeals arise from a common

order, both the appeals are heard together and disposed of by this common

order.

2. In the impugned order it is held that J. V. Stock Broking Pvt. Ltd.

had executed self trades during the examination period i.e. from January 1,

2009 to May 10, 2010. It is also held that some of the self trades were

synchronized. Since there was no denial, it was held that the self trades /

synchronized trades executed by J. V. Stock Broking Pvt. Ltd. created a

false or misleading appearance of trading in violation of PFUTP

Regulations and further created artificial volume of transactions.

3. Counsel for the appellants submitted that execution of synchronized /

self trades is not per se illegal and in the absence of any finding as to how

the said trades created artificial volume and in the absence of any finding as

to how the stockbroker could be said to be negligent in carrying on business

with due care and diligence, the adjudicating officer was not justified in

imposing penalty on the appellants.

4. On perusal of the impugned order it is seen that although in para 29

of the order it is recorded that analysis of the trades reveal that artificial

volume has been created, the said order does not set out the extent to which

the artificial volume was created by the trades in question. Similarly, the 3

impugned does not set out as to what kind of mechanism ought to have

been installed by the stockbroker to prevent self trades. In the absence of

any finding to that effect the stockbroker could not be said to have carried

on business without due care, skill and due diligence.

5. In these circumstances, the impugned order passed against both the

appellants is quashed and set aside and the matter is restored to the file of

the adjudicating officer for fresh decision on merits and in accordance with

law. It would be open to SEBI to issue supplementary show cause notice if

deemed fit. All contentions of both parties kept open.

6. Both appeals are disposed of in the aforesaid terms with no order as

to costs.

Sd/-

Justice J. P. Devadhar Presiding Officer

Sd/-

Jog Singh Member 25.02.2016 Prepared & Compared by PTM