Order against Triumph Securities Ltd. and Classic Shares and Stock Broking Services Ltd. in the matter of SSI Ltd

IN THE MATTER OF S.S.I. Ltd. In respect of: Triumph Securities Ltd. (SEBI Registration No. INB 010980535) Classic Shares and Stock Broking Services Ltd. (SEBI Registration No. INB 010652132) Date of hearing: March 9, 2010 Appearances For Noticees: Mr. R. Krishnan, Advocate For SEBI: Mr. N. Murugan, Presenting Officer Ms. Medha Sonparote, Deputy General Manager Mr. Naveen Kumar, Manager Mr. Pradeep Kumar, Legal Officer ORDER Under Regulation 28(2) read with Regulations 38 (2) of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 1. Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) conducted investigations into the buying, selling and dealing in the shares of SSI Ltd. (hereinafter referred to as ‘SSI’) for the period of October 01, 1999 to June 09, 2000. The trading details of the persons who had traded in the scrip were collected and analyzed along with the data of volumes contributed by the entities traded during the relevant period. During the investigation period, the price of the scrip increased from Rs.650 as on October 01, 1999 to Rs.5380 as on March 10, 2000. Thereafter, the price started declining from Rs.4950 as on March 13, 2000 to Rs.2700 as on June 09, 2000.

2. During the course of investigations, it was inter alia revealed that the brokers viz. Triumph Securities Ltd. [SEBI Registration No. INB 010980535] and Classic Shares and Stock Broking Services Ltd. [SEBI Registration No. INB INB 010652132] (hereinafter collectively referred to as ‘noticees’) both registered with SEBI at the relevant point of time as stock broker, had executed trades in the nature of synchronized deals. Such deals were mainly executed among the Ketan Parekh group entities/ associates.

3. Based on the findings of the investigations, SEBI initiated enquiry proceedings as against the noticees in terms of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to as ‘Enquiry Regulations’), by appointing an Enquiry Officer under Regulation 5(1) of Enquiry Regulations. SEBI appointed the Enquiry Officer, to enquire into the alleged violation 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 SEBI (Stock Broker and Sub Brokers) Regulations, 1992 (hereinafter referred to as ‘Broker Regulations’). The Enquiry Officer submitted his Reports both dated April 30, 2005, in terms of Regulation 13 (1) of the Enquiry Regulations recommending a penalty of suspension of certificate of registration for a period of six months to both the noticees for violating the provisions of Regulation 4(b) of PFUTP Regulations and Clause A (3) and (4) of Code of Conduct as specified in Schedule II of Regulation 7 of Broker Regulations.

4. Subsequently, show cause notices (hereinafter referred to as ‘SCN’) both dated April 10, 2006 under Regulation 13(2) of the Enquiry Regulations were issued to all the noticees asking them to show cause as to why the appropriate penalty including penalty recommended by the Enquiry Officer, should not be imposed. The noticees were advised to reply to the SCN, together with the documents that they may choose to rely upon in support of their replies within fifteen days of the receipt thereof. It was also informed that in case of failure, it would be presumed that it had no explanation to offer and SEBI shall be free to take such action in the manner as it deemed fit. Copy of the Enquiry Reports were also forwarded to the noticees along with the SCN.

5. The noticees replied to the SCN vide their respective letters both dated April 28, 2006 and requested for an opportunity of personal hearing. Accordingly, an opportunity of personal hearing was granted to both the noticees on March 09,

2010. On the date fixed Mr. R. Krishnan, Advocate, appeared on behalf of noticees and reiterated their respective replies.

6. Mr. Krishnan also placed an order of Hon’ble Company Law Board dated December 23, 2008, on record in the matter of Triumph Securities Ltd. I have seen the order of Hon’ble Company Law Board and note that the same restrains the directors of the company to functions as directors. I note that as in the present matter the reply of Triumph Securities Ltd. is on record and the matter has already been delayed for long. I find no merits in keeping these proceedings pending further. Considering this, I am proceeding in the matter of Triumph Securities Ltd. on the basis of material available on record.

7. I have carefully considered the Enquiry Report, the SCN issued to the noticees and their replies. I note that the contentions of the noticees in their replies are more or less similar. The main contentions of noticees, in brief, are: - Trades were executed on few days and for miniscule quantities. - Alleged transactions are genuine trades and executed on the instructions of their clients, while acting as brokers. - Were not related/ associated to Ketan Parekh. - Their certificate of registration has already been cancelled by SEBI. - During the period when transactions were done, client code was not mandatory. - Data relating to the sharp increase and decrease in movement of prices has not been provided. - No proof provided to establish charge requiring intention or mens rea.

8. At the outset, I note the contention raised by the noticees that they have not been supplied with the relied upon documents. I observe from the Enquiry Report that no such plea was taken by noticees before the Enquiry Officer. However, I note that no document, which has not been provided to the noticee, is being relied upon in the present proceedings.

9. Further, the noticees have argued that they were not related/ associated with the Ketan Parekh entities. I note that the noticees herein were the broking entities controlled by Ketan Parekh at the relevant point of time. The argument of noticees appears to be baseless and devoid of any merits, in view of the SEBI order dated March 08, 2004, as they were found to have indulged in manipulative trades in various scrips along with the entities controlled by Ketan Parekh. I note that the findings of the said order were challenged by the noticees herein before Hon’ble Securities Appellate Tribunal (hereinafter referred to as ‘SAT’). Hon’ble SAT after considering the material on record preferred to dismiss the appeals of noticees on merits. Pursuant to this, noticees have not filed any appeal against the order of Hon’ble SAT. In view of this, I note that the Order of SEBI passed on March 08, 2004 stands in place by which the registrations of noticees were cancelled.

10. Considering this, I note that no useful purpose will be served by again canceling the certificate of registration of noticees. Therefore, I hereby dispose of the present Enquiry proceedings initiated against the noticees accordingly.

11. 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 intermediaries Regulations.

12. Taking into consideration, the facts and circumstances of the case, I, 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 dispose of the present Enquiry proceedings as against Triumph Securities Ltd. [SEBI Registration No. INB 010980535] and Classic Shares and Stock Broking Services Ltd. [SEBI Registration No. INB 010652132].

DATE : 4/AUGUST/2010 PRASHANT SARAN PLACE : MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA