Order against Shri Sameer K Chotai (Trade Name: M/s Om Shares & Securities), Sub broker affiliated to MP Vora Shares and Securities Ltd, Member, Bombay Stock Exchange

WTM/PS/22/MIRSD-5/DEC/2012 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under Regulation 28(2) read with Regulation 38(2) of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 in respect of Mr. Sameer K. Chotai (Trade Name: M/s Om Shares & Securities), Sub-Broker affiliated to M.P. Vora Shares and Securities Limited, Member, Bombay Stock Exchange (SEBI Registration No. INS 011251019) 1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI'), on receipt of certain complaints regarding illegal trading activities at Porbandar, Gujarat advised the Bombay Stock Exchange (hereinafter referred to as 'BSE') to analyze the turnover data, location of terminals, trading pattern and history/ background of the entities concerned. Accordingly, BSE carried out inspection of Mr. Samir K. Chotai (hereinafter referred to as 'Samir'), a registered sub-broker operating under the trade name of M/s Om Shares and Securities (SEBI Registration No. INS 011251019), affiliated to M.P. Vora Shares and Securities Limited, Member, BSE on June 28, 2004. The inspection prima facie revealed that Samir had indulged in illegal activities that were not in the interest of the investors.

2. Pursuant to the findings of the inspection, SEBI, vide an ad interim order dated October 14, 2004 (hereinafter referred to as 'interim order') prohibited Samir from buying, selling or dealing in securities in any manner, directly or indirectly with immediate effect, pending completion of the enquiry proceedings that was proposed to be initiated and determination of further appropriate action, upon receipt of the enquiry report. Subsequently, SEBI initiated enquiry proceedings as against Samir in terms of the SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to as the ‘Enquiry Regulations’), by appointing an Enquiry Officer under Regulation 5(1) of the Enquiry Regulations vide order dated October 25, 2004 read with subsequent orders dated February 03, 2006, November 23, 2007 and August 17, 2010.

3. The Enquiry Officer enquired into the alleged violation of the provisions of the SEBI (Criteria for Fit and Proper Person) Regulations, 2004, SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 (hereinafter referred to as ‘PFUTP Regulations’), the Code of Conduct prescribed for the sub-brokers under Schedule II of the SEBI (Stock Brokers and Sub-Broker) Regulations, 1992 (hereinafter referred to as ‘Broker Regulations’), SEBI Circulars, Bye laws/ Business Rules and Regulations of the Stock Exchange. The Enquiry Officer/ Designated Authority (hereinafter referred to as the ‘Designated Authority’) submitted his Report dated March 08, 2011 under the SEBI (Intermediaries) Regulations, 2008, recommending thereby a penalty of cancellation of the Certificate of Registration of Samir for the violation of the aforesaid Regulations and Circulars.

4. Subsequently, a Show Cause Notice (hereinafter referred to as 'SCN') dated March 18, 2011 was issued to Samir in the present proceedings, to show cause as to why the appropriate action including the penalty as recommended by the Designated Authority should not be imposed against him. Samir was advised to reply to the SCN together with the documents that he may choose to rely upon in support of his reply within twenty one date of the receipt thereof. It was also informed that in case of failure, it would be presumed that he had no explanation to offer and SEBI shall be free to take such action in the manner as it deemed fit. A copy of the Enquiry Report was also forwarded to Samir along with the said SCN. The above said SCN was returned undelivered with the remark 'office closed'. Thereafter, on receipt of an alternate address from BSE, the SCN was again forwarded to Samir in the alternate address, vide another letter dated June 02, 2011. This letter was duly served on Samir, however, no reply was received by SEBI to the said SCN. A reminder letter dated July 15, 2011 was also issued to Samir asking for his submissions, if any. This time again, neither any reply nor any request for personal hearing was received from him. Before proceeding further, an opportunity of personal hearing was granted to Samir on November 16, 2011. On the date fixed, the noticee failed to appear for the personal hearing despite due intimation. I have seen that the principles of natural justice are sufficiently complied with in the present matter. In view of the same, I am compelled to proceed with the matter ex-parte, on the basis of material available on record.

5. I note that Samir has not filed any reply to the SCN or to the Report of Designated Authority. It is seen from the interim order that Samir was found guilty of entering into and executing trades outside the trading mechanism provided by BSE, thereby making illegal trades. Samir is also found to have settled such illegal trades in cash on a weekly/ fortnightly/ monthly basis without collecting margin from any of the clients and actual receipt/ delivery of securities either in physical or demat mode. Further, Samir had not maintained client registration forms and the broker-client agreement. These activities of Samir are clearly in violation of SEBI Circulars bearing numbers SMD/POLICY/CIRCULAR/11-97 dated May 21, 1997, SMDRPD/Policy/Cir-6/2001 dated February 01, 2001, SMD/Policy/Cir-12/2002 dated May 17, 2002 and SEBI/MRD/SE/Cir-33/2003/27/08 dated August 27, 2003.

6. It is further seen that the details of the trades available in the register of Samir (date-wise details) were found to be executed outside the trading mechanism of BSE. This shows that Samir had executed the trades in a manner detrimental to the interest of investors in violation of SEBI Circulars bearing number SMDRP/POLICY/CIR-32/99 dated September 14, 1999.

7. Samir in his reply to the show cause notice issued prior to the issue of the interim order has submitted that the practice of trade in their city was ‘different and stylish’. However, I note that Samir has failed to provide the details of his trading pattern/ style etc. by participating in the Enquiry proceedings. In the absence of any defense despite various reminders, it is presumed that he has admitted to all the wrongdoings.

8. I note from the Enquiry Report that the Samir had attempted to persuade BSE officials for not reporting the findings of inspection to SEBI. Such attempts are unethical and unsuited to an intermediary who shares the responsibility of developing the securities market along with the regulator.

9. From the above discussed details about the trading pattern of Samir, I find that he has failed to perform its duties as specified in the code of conduct for sub-brokers in the Broker Regulations and violated the provisions of SEBI (Criteria for Fit and Proper Person) Regulations, 2004, SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, SEBI Circulars bearing No. SMD/POLICY/CIR-11/1997 dated May 21, 1997, SMDRP/POLICY/CIR-32/99 dated September 14, 1999, SMDRP/Policy/Cir-06/2001 dated February 01, 2001, SMD/Policy/Cir-12/2002 dated May 17, 2002 and SEBI/MRD/SE/Cir-33/2003/27/08 dated August 27, 2003. Having considered the above, I agree with the recommendation of the Designated Authority.

10. I note that pursuant to the notification of the Intermediaries Regulations, the Enquiry Regulations have been repealed and in terms of Regulation 38(2) of the Intermediaries Regulations. Notwithstanding such repeal, any enquiry commenced under the Enquiry Regulations, shall be deemed to have been commenced under the corresponding provisions of the Intermediaries Regulations.

11. I, therefore, in exercise of the powers conferred upon me in terms of Section 19 of the Securities and Exchange Board of India Act, 1992 read with Regulation 28(2) of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, hereby cancel the certificate of registration of the sub broker namely Mr. Samir K. Chotai (trade name Om Shares and Securities) bearing SEBI Registration No. INS 011251019.

12. This order shall come into force on expiry of twenty one days from the date of this order.

PLACE: Mumbai PRASHANT SARAN DATE: December 06, 2012 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA