Order against Latin Manharlal Securities Pvt. Ltd.for its dealings in the shares of HFCL, AEL and GTL

1.1 Securities and Exchange Board of India (hereinafter referred to as “SEBI”) conducted investigations into the buying, selling and dealing in the shares of Himachal Futuristic Communications Ltd. (hereinafter referred to as HFCL), Global Telesystems Ltd. (hereinafter referred to as GTL) and Adani Exports Ltd. (hereinafter referred to as AEL) during the period April 01, 2000 to March 31, 2001.

1.2 Investigations revealed that the orders placed by Latin Manharlal Securities Pvt. Ltd. (hereinafter referred to as LMSPL), member of the Bombay Stock Exchange Ltd. (hereinafter referred to as BSE) on behalf of the entities connected and / or controlled by Shri Ketan V. Parekh and Shri Kartik K. Parekh (hereinafter referred to as “KP / Ketan Parekh entities”) got matched with select counterparty brokers who also acted on behalf of KP entities. It was observed that such matched orders of the counterpart brokers were put on behalf of either same KP entity or different set of KP entities which resulted in circular trading.

1.3 Thus, LMSPL was alleged to have aided and abetted KP entities in circular trading thereby creating artificial market and was found to have failed to exercise due skill and care in its dealings on behalf of its client which were related to Shri Ketan Parekh and. It was therefore alleged that LMSPL while executing fictitious deals in the scrips mentioned above, violated Regulation 4 (b), (c) (d) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 (hereinafter referred to as “PFUTP Regulations”) and Clause A (1) and A (2) of the Code of Conduct specified in Schedule II under Regulation 7 of the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 (hereinafter referred to as the “Stock Brokers Regulations”).

1.4 Accordingly, an Enquiry Officer was appointed vide order dated October 14, 2004 under Regulation 5 (1) of the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to as “Enquiry Regulations”) to enquire into violations alleged to have been committed by LMSPL. The Enquiry Officer conducted the enquiry in terms of the Enquiry Regulations and found that the actions of LMSPL were violative of Regulation 4 (b), (c) (d) of the PFUTP Regulations and Clause A (2) of the Code of Conduct specified under Schedule II read with Regulation 7 of Stock Brokers Regulations. The Enquiry Officer submitted his report dated May 19, 2005, recommending a penalty of suspension of certificate of registration of MBSL for a period of one month.

1.5 Based on the recommendations of the Enquiry Officer, a show cause notice dated June 7, 2005 along with a copy of the enquiry report was forwarded to LMSPL in terms of Regulation 13 (2) of the Enquiry Regulations advising it to show cause as to why action as recommended by the Enquiry Officer should not be taken against them.

1.6 LMSPL vide letter dated June 23, 2005, replied to the said show cause notice inter alia stating as under:

i. From the perusal of trade logs relied upon by the enquiry officer and investigation officer it is revealed that the same is beyond the period of investigation as it takes into account the transaction executed during the period October 1999 to March 2000 whereas the investigation order period is limited to the trades between the period April 2000 to March 2001. Hence the enquiry report is predetermined. ii. LMSPL purely acted as broker and only on instructions of their clients to earn their legitimate brokerage. Further, while executing the trades they had duly discharged all the obligations enjoined upon under the rules and regulations of SEBI and BSE. iii. LMSPL had no connection or relationship of any nature either with KP or any KP entities and had exclusive member – client relationship governed by a duly executed member client agreement as envisaged by the Rules and Regulations of SEBI. iv. All the transactions of LMSPL done on behalf of these two KP entities were done through the trading system of BSE i.e. (BOLT). In screen based transactions, it is highly impossible to ascertain the counter party broker.

In every transaction either the payment was made or received and / or were backed by the delivery of the scrip and / or settled as per the net position of the concerned client at the end of each settlement. Further, as required by the Rules, Regulations and Bye-laws of the Exchange, contract notes were issued in support of the transactions and there has been an effective transfer of beneficial ownership in the shares. v. LMSPL denied of entering into any structured deals. They acted in accordance with the instructions given by the clients. It was submitted that the transactions were carried out within the four corners of SEBI Circular dated September 14, 1999. vi. In respect of trades done in the scrip of HFCL, there is not even a single instance of trading done by them on behalf of KP entities on NSE as at the relevant time they were not the member of NSE. Moreover with respect to circular trades of KP entities, through CFSB proprietary account there were only two instances of trade done by them i.e. on August 27, 2000 and November 21, 2000 which by no stretch of imagination be called circular trade.

Hence it cannot be contented that LMSPL aided and / or abetted KP entities to create artificial volumes in HFCL. vii. In respect of trades done in the scrip of GTL, there is only one trade and the allegations leveled against them are incorrect. viii. In respect of AEL, there are only three trades which are alleged to be synchronized and it is also admitted in the findings of the Enquiry Officer that the said few trades itself cannot be regarded as sufficient proof to hold execution of synchronized deals. ix. Further, the trade logs giving details of the trade, the trade time and order time does not show a difference of even one second. x. The learned enquiry officer has failed to take into consideration the facts that during the period of investigation there was a system of five (5) day settlement. The details regarding net position at the end of the then current settlement ought to have been taken into account before drawing any inference in the above matter. xi. With respect to finding that they have aided and abetted KP entities to create artificial volume in the market, it is submitted that there is no evidence to support such findings and no concrete evidence is available on record evidencing any connection between LMSPL and KP entities except a client broker relation ship. xii.

Regulation 3(2) of the SEBI (Criteria for Fit and Proper Person) Regulation, 2004 are not applicable or attracted in the present case.

2.1 An opportunity of personal hearing was granted to LMSPL before me on August 14, 2006 wherein the noticees along with their advocate Shri S.H. Merchant appeared and made their submissions. LMSPL further submitted its written submissions dated August 23, 2006 which are similar to its submissions dated June 24, 2005.

3.1 I have carefully examined the investigation report, enquiry report, the show cause notice and submissions of LMSPL and other material on record.

3.2 At the outset, I note that LMSPL has contended that the Enquiry Report is predetermined and beyond the scope of show cause notice as regards the investigation period. From the documents available on record and taking them on their face value, and perusal of Annexure- A to the show cause notice dated November 8, 2004, I find that the trades executed by LMSPL in the scrip of HFCL during the period October 1999 – March 2000 were provided as annexures to the show cause notice which forms part of the show cause notice. LMSPL was put on guard as to the material proposed to be relied upon by SEBI while giving an opportunity to rebut the charges. Therefore, this technical objection is not sustainable.

3.3 The shares of HFCL and GTL were sold by the entities associated with Shri Ketan Parekh namely, Classic Credit Ltd. (Classic Credit), Luminant Investment Pvt. Ltd. (Luminant) and Panther Fincap & Management Services Ltd. (Panther Fincap) through the brokers CSFB Securities Ltd. (CSFB) and DKB Securities Ltd. (DKB). These shares were bought through different brokers including LMSPL either by the same KP entities namely, Classic Credit and Panther Fincap or by other KP entities namely, Saimangal Investrade Ltd. (Saimangal), NH Securities Ltd. (NH Securities – proprietary account), Classic Shares and Stock Brokers Ltd. (Classic Shares–proprietary account) and Chitrakut Computers Pvt. Ltd. (Chitrakut).

3.4 In the scrip of AEL, KP entities bought the shares through various brokers at BSE and NSE which were earlier sold by KP entities through CSFB. I further note that LMSPL purchased 2,00,412 shares of AEL which were sold by other KP entities through the broker CSFB which were structured deals, details of which are as under :

Buy Sell Buy Sell Buy Sell Buy Membe Sell Buy Sell Order Buy Order Order Order Order Order Order Order r Name Client Client No No Time Time Qty Qty Rate Rate 49700500010 4050460000 Latin M LIPL PFMS 016920 0001615 14:46:31 14:46:30 100000 100100 610.00 610.00 49700500010 4050460000 Latin M LIPL PFMS 016921 0001616 14:49:11 14:49:48 4899 500 607.00 607.00 49700500010 4050460000 Latin M LIPL PFMS 020077 0001997 12:42:18 12:42:21 100000 100000 822.00 822.00

3.5 I note that Classic Credit and Panther Fincap indulged in circular trades in the scrip of HFCL through CSFB’s proprietary account by using the following modus operandi: KP entities first purchased the shares from CSFB proprietary account by synchronizing the trades. Then, on the same day after a short gap they sold these very shares to CSFB proprietary account, through CSFB by way of cross deals. In the similar fashion, shares of HFCL were sold by KP entities through DKB.

3.6 I observe that LMSPL was also a counter party broker for the following transactions in the scrip of HFCL. In this regard, I note that there was some typographical error regarding timings of trade mentioned in the table given in the show cause notice as well as the Enquiry Report which has been pointed out by the noticee also. From the factual verification of the trade and order logs obtained from the stock exchanges, I note that though there was a zero time difference between the placing of buy and sell orders with respect to some trades as alleged, there were some orders wherein there was very negligible time difference. In this regard, it may be mentioned that a broker does have the record of time of placing of its orders and also actual time of their execution. From the said details (revised table given below) it is very clear that the broker had a role in synchronisation of few trades done by the KP entities.

Clien Settle Counter t ment Trade Trade Trade Trade Order Buy/ Order Order Order Membe Party Nam No. Date TradeNo Time Qty Price Number Sell Rate Qty time r Name Name e Latin Milan 06-Oct- 405001000 Manhar Mahendra 00 86728 13:38:20 59915 1276 10003982 S 1276 60000 13:38:18 lal Sec PFMS Milan 06-Oct- 460012000 Mahen Latin 2000028 00 86728 13:38:20 59915 1276 10001223 B 1276 60000 13:38:19 dra Sec Manharlal PFMS Latin Milan 10-Oct- 405001000 Manhar Mahendra 00 43536 13:22:42 120000 1215.5 10003989 B 1215.5 120000 13:22:42 lal Sec PFMS Milan 10-Oct- 460012000 Mahen Latin 2000029 00 43536 13:22:42 120000 1215.5 10001248 S 1215.5 120000 13:22:42 dra Sec Manharlal PFMS Latin Milan 13-Oct- 405001000 Manhar Mahendra 00 133452 11:55:53 113780 1002 10004039 S 1002 120000 11:55:53 lal Sec PFMS Milan 13-Oct- 460012000 Mahen Latin 2000029 00 133452 11:55:53 113780 1002 10001292 B 1002 120000 11:55:52 dra Sec Manharlal PFMS Latin Milan 16-Oct- 405001000 Manhar Mahendra 00 9885 12:13:22 90237 1101 10004067 B 1101 100000 12:13:22 lal Sec PFMS Milan 16-Oct- 460012000 Mahen Latin 2000030 00 9885 12:13:22 90237 1101 10001345 S 1101 100000 12:13:17 dra Sec Manharlal PFMS Latin Milan 16-Oct- 405001000 Manhar Mahendra 00 18681 14:04:06 11030 1085 10004079 B 1085 15000 14:04:06 lal Sec PFMS Milan 16-Oct- 460012000 Mahen Latin 2000030 00 18681 14:04:06 11030 1085 10001354 S 1085 15000 14:04:05 dra Sec Manharlal PFMS

2000030 20-Oct- 179168 14:19:42 33800 1244 405046000 S 1244 35000 14:19:42 Latin Milan PFMS 00 00000998 Manhar Mahendra

Clien Settle Counter t ment Trade Trade Trade Trade Order Buy/ Order Order Order Membe Party Nam No. Date TradeNo Time Qty Price Number Sell Rate Qty time r Name Name e lal Sec Milan 20-Oct- 460012000 Mahen Latin 00 179168 14:19:42 33800 1244 10001420 B 1244 35000 14:19:42 dra Sec Manharlal PFMS Latin Vidyut 10- 405046000 Manhar Devendrak Nov-00 117495 10:11:55 12750 1345 00001211 B 1345 21000 10:11:54 lal umar PFMS Vidyut Devend 10- 685001000 rakuma Latin 2000033 Nov-00 117495 10:11:55 12750 1345 10022997 S 1345 21000 10:11:54 r Manharlal CCL Latin Vidyut 20- 405046000 Manhar Devendrak Nov-00 5657 10:38:10 34900 1332.5 00001245 S 1332.5 35000 10:38:07 lal umar PFMS Vidyut Devend 20- 685001000 rakuma Latin 2000035 Nov-00 5657 10:38:10 34900 1332.5 10023824 B 1332.5 35000 10:38:09 r Manharlal CCL Keynot e 20- 120001000 Capital Latin Nov-00 22096 14:26:06 24730 1339 10007622 B 1339 25000 14:26:06 s Manharlal PFMS Latin 20- 405046000 Manhar Keynote 2000035 Nov-00 22096 14:26:06 24730 1339 00001249 S 1339 25000 14:26:04 lal Capitals PFMS Latin 21- 405046000 Manhar Pravin V Nov-00 32835 10:31:02 11231 1289 00001252 S 1299 12000 10:30:27 lal Shah PFMS 21- 558001000 Pravin Latin 2000035 Nov-00 32835 10:31:02 11231 1289 10003745 B 1289 12000 10:31:02 V Shah Manharlal PFMS Latin 21- 405046000 Manhar Mukesh Nov-00 46450 14:08:39 24394 1294.3 00001254 S 1294.3 25000 14:08:38 lal Babu Sec PFMS Mukes 21- 450003000 h Babu Latin 2000035 Nov-00 46450 14:08:39 24394 1294.3 10008097 B 1294.3 25000 14:08:39 Sec Manharlal PFMS Latin Milan 30- 405046000 Manhar Mahendra Nov-00 122701 14:51:08 19000 1421 00001350 B 1421 20000 14:51:07 lal Sec PFMS Milan 30- 460001000 Mahen Latin 2000036 Nov-00 122701 14:51:08 19000 1421 10020790 S 1421 20000 14:51:08 dra Sec Manharlal PFMS Hem 15-Dec- 248003000 Securiti Latin 00 118352 12:36:18 42690 1389 10002537 B 1389 46000 12:36:18 es Manharlal PFMS Latin 15-Dec- 405046000 Manhar Hem 2000038 00 118352 12:36:18 42690 1389 00001442 S 1389 46000 12:36:18 lal Securities PFMS Omega 26-Dec- 163001000 Equitie Latin 00 46123 14:50:57 69161 1124 10004694 B 1124 70000 14:50:57 s Manharlal Latin 26-Dec- 405046000 Manhar Omega 2000040 00 46123 14:50:57 69161 1124 00001490 S 1124 70000 14:50:56 lal Equities PFMS

Clien Settle Counter t ment Trade Trade Trade Trade Order Buy/ Order Order Order Membe Party Nam No. Date TradeNo Time Qty Price Number Sell Rate Qty time r Name Name e Omega 26-Dec- 163001000 Equitie Latin 00 46230 14:51:54 19675 1123 10004695 B 1123 20000 14:51:54 s Manharlal Latin 26-Dec- 405046000 Manhar Omega 2000040 00 46230 14:51:54 19675 1123 00001491 S 1123 20000 14:51:54 lal Equities PFMS Hem 19-Jul- 248003000 Securiti Latin 00 67618 15:20:30 49980 1354.00 00000474 S 1354 50000 15:20:30 es Manharlal CCL Latin 19-Jul- 405003000 Manhar Hem 2000017 00 67618 15:20:30 49980 1354.00 00016508 B 1354 50000 15:20:30 lal Securities CCL 21-Jul- 850040000 C J Latin 00 122664 15:14:04 14842 1364.50 0001191 B 1364.5 20000 15:14:02 Dalal Manharlal PFMS Latin 21-Jul- 405001000 Manhar 2000017 00 122664 15:14:04 14842 1364.50 00002185 S 1364.5 20500 15:14:03 lal C J Dalal CCL Latin Milan 29- 405003000 Manhar Mahendra Aug-00 50406 14:21:23 35720 1418.00 10025463 B 1418 36000 14:21:23 lal Sec PFMS Milan 29- 460012000 Mahen Latin 2000023 Aug-00 50406 14:21:23 35720 1418.00 10000730 S 1418 36000 14:21:18 dra Sec Manharlal PFMS Latin Milan 07-Sep- 405046000 Manhar Mahendra 00 123050 14:20:06 24141 1645.00 00000152 S 1645 25000 14:20:06 lal Sec PFMS Milan 07-Sep- 460012000 Mahen Latin 2000024 00 123050 14:20:06 24141 1645.00 10000822 B 1645 25000 14:20:05 dra Sec Manharlal PFMS 08-Sep- 850040001 C J Latin 00 143205 10:53:42 11000 1655.50 0001889 B 1655.5 11000 10:53:41 Dalal Manharlal PFMS Latin 08-Sep- 405001000 Manhar 2000024 00 143205 10:53:42 11000 1655.50 10003521 S 1655.5 11000 10:53:41 lal C J Dalal PFMS Latin Milan 18-Sep- 405001000 Manhar Mahendra 00 27820 14:35:54 14300 1586.00 10003831 B 1586 15000 14:35:52 lal Sec PFMS Milan 18-Sep- 460001000 Mahen Latin 2000026 00 27820 14:35:54 14300 1586.00 10012839 S 1586 15000 14:35:53 dra Sec Manharlal PFMS Latin Milan 18-Sep- 405001000 Manhar Mahendra 00 27847 14:36:13 14385 1580.00 10003832 B 1580 15000 14:36:12 lal Sec PFMS Milan 18-Sep- 460001000 Mahen Latin 2000026 00 27847 14:36:13 14385 1580.00 10012840 S 1580 15000 14:36:11 dra Sec Manharlal PFMS Latin Milan 22-Sep- 405046000 Manhar Mahendra 00 206869 12:34:23 25537 1333.00 00000672P S 1333 30000 12:34:22 lal Sec PFMS Milan 22-Sep- 460012000 Mahen Latin 2000026 00 206869 12:34:23 25537 1333.00 10001071 B 1333 30000 12:34:22 dra Sec Manharlal PFMS

Clien Settle Counter t ment Trade Trade Trade Trade Order Buy/ Order Order Order Membe Party Nam No. Date TradeNo Time Qty Price Number Sell Rate Qty time r Name Name e Aldan 11-Jan- 181001000 Invest Latin 01 205495 15:11:29 28310 1137.5 10006090 B 1137.5 35000 15:11:29 ments Manharlal PFMS Latin Aldan 11-Jan- 405046000 Manhar Investment 2000042 01 205495 15:11:29 28310 1137.5 00001688 S 1137.5 35000 15:11:28 lal s PFMS Aldan 12-Jan- 181001000 Invest Latin 01 251591 14:44:15 14250 1192 10006154 S 1192 20000 14:44:14 ments Manharlal PFMS Latin Aldan 12-Jan- 405046000 Manhar Investment 2000042 01 251591 14:44:15 14250 1192 00001729 B 1192 20000 14:44:11 lal s PFMS Latin Mangal 12-Jan- 405046000 Manhar Keshav 01 256283 15:13:06 35867 1177 00001742 B 1177 40000 15:13:03 lal Share PFMS Mangal 12-Jan- 491021000 Keshav Latin 2000042 01 256283 15:13:06 35867 1177 10002342 S 1177 40000 15:13:05 Share Manharlal PFMS Latin Mangal 16-Jan- 405046000 Manhar Keshav 01 90155 14:25:54 23963 1103.5 00001781 S 1103.5 25000 14:25:52 lal Share PFMS Mangal 16-Jan- 491021000 Keshav Latin 2000043 01 90155 14:25:54 23963 1103.5 10002389 B 1075 25000 14:25:35 Share Manharlal PFMS Latin 19-Jan- 405046000 Manhar Mukesh 01 200949 11:31:45 14410 1193.5 00001799 B 1193.5 15000 11:31:45 lal Babu Sec PFMS Mukes 19-Jan- 450003000 h Babu Latin 2000043 01 200949 11:31:45 14410 1193.5 10011173 S 1193.5 15000 11:31:45 Sec Manharlal PFMS Latin 25-Jan- 405001000 Manhar Latin 01 126069 13:03:46 49665 1252 10006491 B 1252 50000 13:03:45 lal Manharlal CCL Latin 25-Jan- 405046000 Manhar Latin 2000044 01 126069 13:03:46 49665 1252 00001847 S 1252 50000 13:03:44 lal Manharlal PFMS Latin 25-Jan- 405001000 Manhar Latin 01 126081 13:03:56 44815 1252 10006492 B 1252 50000 13:03:56 lal Manharlal CCL Latin 25-Jan- 405046000 Manhar Latin 2000044 01 126081 13:03:56 44815 1252 00001848 S 1252 50000 13:03:56 lal Manharlal PFMS Latin 25-Jan- 405046000 Manhar Mukesh 01 133188 14:46:39 45550 1237.5 00001909 B 1237.5 50000 14:46:39 lal Babu Sec PFMS Mukes 25-Jan- 450003000 h Babu Latin 2000044 01 133188 14:46:39 45550 1237.5 10011771 S 1237.5 50000 14:46:38 Sec Manharlal PFMS Latin Vidyut 25-Jan- 405046000 Manhar Devendrak 01 134247 14:53:30 28334 1234.8 00001925 B 1234.8 28334 14:53:22 lal umar PFMS Vidyut Devend 25-Jan- 685001000 rakuma Latin 2000044 01 134247 14:53:30 28334 1234.8 10030766 S 1234.8 30000 14:53:29 r Manharlal CCL

Clien Settle Counter t ment Trade Trade Trade Trade Order Buy/ Order Order Order Membe Party Nam No. Date TradeNo Time Qty Price Number Sell Rate Qty time r Name Name e Keynot e 09-Feb- 120005000 Capital Latin 01 205448 14:12:22 158942 999 10007772 S 999 159000 14:12:22 s Manharlal PFMS Latin 09-Feb- 405046000 Manhar Keynote 2000046 01 205448 14:12:22 158942 999 00002093 B 999 159000 14:12:22 lal Capitals PFMS Latin 09-Feb- 405046000 Manhar Mukesh 01 209865 14:47:23 91473 990 00002138 B 990 100000 14:47:23 lal Babu Sec PFMS Mukes 09-Feb- 450003000 h Babu Latin 2000046 01 209865 14:47:23 91473 990 10012957 S 990 100000 14:47:23 Sec Manharlal PFMS

Latin 09-Feb- 405046000 Manhar Mukesh 01 209922 14:47:55 46709 990 00002141 B 990 50000 14:47:54 lal Babu Sec PFMS Mukes 09-Feb- 450003000 h Babu Latin 2000046 01 209922 14:47:55 46709 990 10012958 S 990 50000 14:47:55 Sec Manharlal PFMS Latin Milan 02- 405046000 Manhar Mahendra Mar-01 224430 13:15:03 49820 645.5 00002217 S 645.5 50000 13:15:02 lal Sec PFMS Milan 02- 460012000 Mahen Latin 2000049 Mar-01 224430 13:15:03 49820 645.5 10002220 B 645.5 50000 13:15:01 dra Sec Manharlal PFMS Omega 07- 163001000 Equitie Latin Mar-01 66228 13:18:32 90433 445 10006858 S 445 100000 13:18:32 s Manharlal PFMS Latin 07- 405046000 Manhar Omega 2000050 Mar-01 66228 13:18:32 90433 445 00002237 B 445 100000 13:18:32 lal Equities PFMS Omega 07- 163001000 Equitie Latin Mar-01 67251 13:23:58 99925 431 10006860 S 431 100000 13:23:58 s Manharlal PFMS Latin 07- 405046000 Manhar Omega 2000050 Mar-01 67251 13:23:58 99925 431 00002249 B 431 100000 13:23:57 lal Equities PFMS Latin 07- 405046000 Manhar Woodstock Mar-01 68276 13:33:37 98552 441 00002260 B 441 100000 13:33:36 lal Securities PFMS Woodst ock 07- 753001000 Securiti Latin 2000050 Mar-01 68276 13:33:37 98552 441 10004870 S 441 100000 13:33:37 es Manharlal PFMS 07- 850010001 C J Latin Mar-01 69808 13:54:22 57342 435.25 0007897 S 435.25 57792 13:54:22 Dalal Manharlal PFMS Latin 07- 405046000 Manhar 2000050 Mar-01 69808 13:54:22 57342 435.25 00002275 B 435.25 57792 13:54:22 lal C J Dalal PFMS

2000050 07- 69873 13:55:21 71563 433 140001000 S 433 75000 13:55:20 Milleni Latin PFMS Mar-01 10003393 um Manharlal Equitie

Clien Settle Counter t ment Trade Trade Trade Trade Order Buy/ Order Order Order Membe Party Nam No. Date TradeNo Time Qty Price Number Sell Rate Qty time r Name Name e s Latin 07- 405046000 Manhar Millenium Mar-01 69873 13:55:21 71563 433 00002277 B 433 75000 13:55:21 lal Equities PFMS Milleni um 07- 140001000 Equitie Latin Mar-01 69992 13:57:42 24985 435 10003394 S 435 25000 13:57:41 s Manharlal PFMS Latin 07- 405046000 Manhar Millenium 2000050 Mar-01 69992 13:57:42 24985 435 00002280 B 435 25000 13:57:40 lal Equities PFMS

Milleni um 07- 140001000 Equitie Latin Mar-01 71222 14:11:17 96059 436 10003395 S 436 100000 14:11:16 s Manharlal PFMS Latin 07- 405046000 Manhar Millenium 2000050 Mar-01 71222 14:11:17 96059 436 00002294 B 436 100000 14:11:16 lal Equities PFMS

3.7 From the above, it can be seen that LMSPL executed 42 structured trades in the scrip of HFCL. The buy and sell orders for these trades were entered almost at the same time and the order quantity and price were the same for all the orders, except two (synchronised).

3.8 As mentioned above, LMSPL was involved in executing structured trades in the scrip of HFCL where the counter party brokers were DKB and CSFB for KP entities (clients) who traded on the buy as well as the sell side. Details of the said trades are given as under :

Sell Sell Sell Buy Buy Buy Sell Order Order Order Order Buy Order Order Order Order No Time Qty Price No Time Qty Price Remarks 49700100010 4050010001 Shares sold by CSFB 000475 13:17:19 50000 1603.5 0002929 13:17:18 50000 1603.5 – Proprietary Account through CSFB is purchased by 49700300010 4050460000 KP entities through 006929 10:15:43 65000 1287.5 0001251 10:15:42 65000 1287.5 LMSPL 276001000 600 117 4050460000 600 KP entity is selling 10000258 15:20:08 00 8 0001040 15:20:07 00 1178 through DKB and KP entity is purchasing 276002000 11:01:28 125 132 4050460000 11:01:28 125 1320

Sell Sell Sell Buy Buy Buy Sell Order Order Order Order Buy Order Order Order Order No Time Qty Price No Time Qty Price Remarks 10015825 000 0 0001247 000 through LMSPL 276001000 550 144 4050460000 550 10000707 10:50:33 00 2 0001379 10:50:36 00 1442 276002000 150 151 4050460000 900 10019175 13:54:27 000 5 0001406 13:54:30 00 1515 276002000 106 112 4050460000 500 10022495 10:44:37 000 2.5 0001488 10:44:36 00 1122.5 276001000 100 112 4050460000 100 10000937 14:47:55 000 3 0001489 14:47:54 000 1123

3.9 In the scrip of GTL also LMSPL was involved in circular trades where KP entities were buying and selling the shares of GTL amongst themselves, details of which are as under: Sell Sell Sell Buy Buy Buy Sell Order No/ Order Order Order Buy Order No/ Order Order Order Date Time Qty Price Date Time Qty Price Remarks KP entity is selling through DKB and purchasing through 27600100000001046 15:16:06 100000 671.5 40504600000002158 15:16:04 100000 671.5 LMSPL

3.10 From the above tables, I note that LMSPL had executed as many as 55 trades on behalf of KP entities. Out of the said 55 trades, 51 trades were executed in the scrip of HFCL, one trade in the scrip of GTL and three trades in the scrip of AEL. I have noted the submissions of LMSPL that the trades were executed by them based on the order from their clients. It is pertinent to note that the ordered quantities in the said trades and the order price are identical in the above trades. The perfect matching of the trades in an identical fashion over a long period clearly indicate that these were synchronised transactions and cannot be executed without the knowledge and active participation of the broker. The nature of transactions itself indicates nexus between the broker and the clients.

3.11 I find that the trades executed by LMSPL on behalf of KP entities in the scrip of HFCL appear to be synchronised as evidenced by identical quantities of the orders, simultaneous placing the orders, identical prices etc. on most of the occasions. Hence the above characteristics of the trades reveal the predetermined fashion in which the said trades were executed.

3.12 On perusal of the trade and order log, I observe that apparently buy and sell brokers had put orders with prior understanding with a view to ensure that the sell order of one set of KP entities matched with the buy order of same/other set of KP entities. By entering into these synchronised deals, shares sold by KP entities were again purchased back by KP entities, which resulted in circular trading. This type of trading continued over a period of time.

3.13 It cannot be a coincidence that for such large number of transactions executed over a period of time, there is perfect matching of order time, quantity and price of the buy and sell orders. On the contrary, the above characteristics clearly lead to the conclusion that the same were executed on the basis of predetermined plan so as to result in matched trades. In view of the same it can be concluded that the same are synchronised trades. Though it is noted that LMSPL had executed 3 trades in AEL and 1 trade in GTL which are alleged to be synchronised. In the scrip of HFCL, the large number of transactions executed over a period of time in identical manner establish that the same were synchronised trades.

3.14 From the perusal of facts and circumstances and in view of large number of synchronised transactions executed by LMSPL on behalf of KP entities on the buy as well as sell side in the scrip of HFCL, I find that LMSPL has aided and abetted KP entities to create false and misleading appearance of trading in violation of Regulation 4 (b), (c) and (d) of SEBI (PFUTP) Regulation.

3.15 Further, I find that as far as the scrip of HFCL is concerned LMSPL had executed as many as 51 trades on the behalf of the said clients which were buyers as well as sellers. On two instances, LMSPL was both the buying and selling broker for the synchronised trades executed in the scrip of HFCL. The large number of transactions and also the synchronised manner of execution of trades over a period of time clearly indicate that LMSPL also failed to exercise due skill, care and diligence as mandated under the provisions of clause A(2) of Schedule II read with Regulation 7 of the Stock Broker Regulations.

3.16 Based on the material available on record, I find that LMSPL was very much aware of the fact that Ketan Parekh entities were transacting in the market from other broker terminals also. There is enough material evidencing the trading behaviour of Ketan Parekh entities and I am of the view that any broker of normal prudence can deduce that such trades cannot happen without premediation. In view of the above, I find that LMSPL has violated Regulation 4 (b), (c) and (d) of SEBI (PFUTP) Regulations, as applicable at the relevant time when the act was committed and clause A (2) of Code of Conduct as specified under Schedule II of Regulation 7 of the Stock Broker Regulations. However, taking into consideration the total number of synchronised trades vis a vis the total trades executed during relevant period and also trades were executed on behalf of clients and not on own its proprietary account, the ends of justice would meet if the penalty as recommended by the Enquiry Officer is reduced.

4.1 Therefore, in exercise of the powers conferred upon me under section 19 of the SEBI Act, 1992, read with Regulation 13(4 ) of the Enquiry Regulations, I hereby impose a penalty of suspension of certificate registration for a period of three days on Latin Manharlal Securities Pvt. Ltd., Member of BSE, bearing registration SEBI No INB011072056 (PAN No. AAACL2767L)

4.2 This order shall come into force immediately after the expiry of 21 days from the date of this order.

PLACE: MUMBAI T .C. NAIR DATE:20/02/2008 WHOLE-TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA