Order in respect of Bhavesh Kothari, partner Money Magnet Securities in the matter of Synchronized Trading by Connected Persons.

ORDER Under section 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 in the matter of Synchronized Trading by Connected Persons-in respect of Shri Bhavesh Kothari (PAN: AABPK7614H) partner of Money Magnet Securities, Sub Broker (SEBI Reg No-INS013786723). 1. Securities and Exchange Board of India ("SEBI"), on the basis of certain alerts received on its Integrated Market Surveillance System, conducted investigations into the synchronized / circular trades, etc. alleged to have been executed in certain scrips on the BSE Limited ("BSE") by a group of related/connected entities, to ascertain the possible violation of the provisions of the Securities and Exchange of Board of India Act, 1992 („SEBI Act’), the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to securities Market) Regulations, 2003 („PFUTP Regulations’), the SEBI (Stock Brokers and Sub-brokers) Regulations, 1992, (“Brokers Regulations”) and the SEBI (Intermediaries) Regulations, 2008 („Intermediaries Regulations’), alleged to have been committed by Money Magnet Securities ("Money Magnet") sub-broker affiliated to the stock broker viz., India Capital Markets Private Limited and others during the period March 01, 2009 to December 15, 2009 ("Investigation period")

2. The investigations, prima facie, revealed that a group of related/connected entities were involved in carrying out irregular/manipulative activities in various scrips viz., Allcargo Global Logistics Limited ("Allacargo"), Asian Star Company Limited ("Asian"), KSL & Industries Limited ("KSL"), Mavens Biotech Limited ("Mavens"), Panoramic Universal Limited ("Panaromic"), Rasi Electrodes Limited ("Rasi"), Sat Industries Limited ("SIL") ,Ushdev International Limited ("Ushdev"), KBS Capital Management Limited ("KBS"), Lotus Eye care Hospitals Limited ("Lotus"), MVL Limited ("MVL") and Anil Products Limited ("APL").

3. The order/trade log analysis done in the respective scrips, prima facie, revealed that during the investigation period, the said connected/related entities, in collusion with some of the market intermediaries - including Money Magnet had traded/dealt in the shares of the aforesaid Companies and they created artificial volumes in the said scrips by allegedly indulging into synchronized/structured/circular trades etc. Allegedly, a number of connected entities had traded in the abovementioned scrips through the trading terminal of Money Magnet. Further, it was also observed during the investigations that the above said connected entities, while acting in collusion with Money Magnet and other entities, were apparently interested in creating artificial volumes in the aforesaid scrips and in the process the orders placed by them also influenced the price of those scrips. It is alleged that the sub-broking activities of Money Magnet were controlled by Mr. Bhavesh Kothari, the partner of Money Magnet who used to decide the scrip, price, quantity, etc. on behalf of the said clients and this way a significant number of structured/synchronized trades were executed through the trading terminal of Money Magnet.

4. Based on the above said observations of the investigations, it has been alleged that Money Magnet, while acting in collusion with others, aided and abetted in manipulations, created artificial volumes and also influenced price of various scrips and thereby violated/ contravened the provisions of Regulations 4 (1), 4(2) (a), (b), (e) and (n) of the PFUTP Regulations and Clauses A(1), (2), B (7), D(1), (4) and D(5) of the Code of Conduct for sub-brokers as prescribed in Schedule II of Regulation 15 of the Brokers Regulations.

5. Pursuant to the investigations, SEBI initiated enquiry proceedings against Money Magnet under regulation 24 of the Intermediaries Regulations, to enquire into the aforesaid violations alleged to have been committed by it. The Designated Authority issued a Show Cause Notice dated March 12, 2012 to Money Magnet for the alleged violations.

6. In response to the said Show Cause Notice, Mr. Bhavesh Kothari, partner of the Noticee, vide letter dated April 10, 2012 submitted as under:  "That in the matter earlier he had received a show cause notice dated February 08, 2012 in his individual name and he has already replied to the same vide his letter dated March 01, 2012.  The instant proceedings against the Noticee are in the same matter and since he was individually managing the firm, his reply in respect of the Notice shall also remain the same.  The registration of the Noticee has already been cancelled and its activities have been discontinued. The name of the Noticee is neither appearing on the BSE website nor on the NSE website as a sub-broker of India Capital Markets Pvt. Ltd. (The Noticee enclosed a few of the documents in support of its submissions regarding cancellation of its SEBI registration)".

7. The Designated Authority, upon consideration of the allegations leveled against Money Magnet, noted the following: i. The SEBI investigations, prima facie, revealed that a group of persons viz., Jitendra Jain, Usha Mehta, Sunil Kumar Mehta, Anjana Mehta, Renu Madhusudhan Paliwal, Rashmi R Gandhi, Ramesh Gandhi, Hemlata Ramesh Hankare, Manish Mathur, Seema Mathur, Ajay Roongta, Bharat Jain, Suresh Hanswal, Hasmukh Valchand Jain, Naresh V Rajawat, Pawanben Valchand Jain, Reeta Naresh Rajawat, Kunal Dileep Kothari, Sweta Bharat Kothari, Neela Khicha, Shobha Dilip Kothari, Kamlesh P Jain, Hitesh Mahendra Jain, Bhavesh Kothari, Namita Khischa, Vinay Kothari, Pradeep Kothari, Sitanshu Nanawati, Devendra Kumar Rai, Rakesh H Jain, Bhavesh Jain, Meena Rajawat, Shaikh Soalli Jainuddin, Alpesh R Shah, Anil Rajmal Shah, Praveen Gate are related /connected/linked to each other and they together form a group (hereinafter collectively referred to as "Mehta Group”).

ii. The scrips in which the said Mehta Group entities alleged to have traded and taken for the said investigation were Allcargo ,Asian, KSL, Mavens, Panaromic, Rasi, SIL, Ushdev, KBS, Lotus, MVL and APL during the period July 01, 2009 to December 15, 2009.

iii. The order/trade log analysis done in the respective scrips, prima facie, revealed that during the investigation period, the Mehta Group entities, in collusion with some of the market intermediaries - including Money Magnet had traded/dealt in the shares of the aforesaid Companies and they created artificial volumes in the said scrips by allegedly indulging in synchronized/structured/circular trades etc.

iv. The SEBI investigations have prima facie, revealed that the following clients had traded in the abovesaid scrips through the trading terminal of Money Magnet. The relevant details in this regard are placed below:

No. of Gross Structured Structured Gr Str Trd Trades No. of No. of Str Trade qty as % of (buy & Str Buy Sell Quantity Gross Mkt Scrip Client sell) Orders Orders (buy & sell) Vol Anjana Mehta 6 5 1 500 0.0185 Hasmukh Valchand Jain 5 2 1 1500 0.0555 Hitesh Mahendra Jain 56 18 21 12000 0.4438 Kamlesh P Jain 22 6 6 5247 0.1941 Kunal Dileep Kothari 8 2 2 2600 0.0962 Naresh V Rajawat 11 4 2 3600 0.1331 Allcargo Neela Khicha 12 5 3 3000 0.1110 Pawanben Valchand Jain 26 6 7 5422 0.2005 Reeta Naresh Rajawat 46 11 11 9880 0.3654 Shobha Dilip Kothari 4 1 1 902 0.0334 Sweta Bharat Kothari 12 2 4 3200 0.1184 Total 208 62 59 47851 1.7697 Hasmukh Valchand Jain 9 4 1 1999 0.0304 Hitesh Mahendra Jain 22 6 5 3512 0.0534 Kamlesh P Jain 17 4 4 3200 0.0487 Kunal Dileep Kothari 16 3 5 4600 0.0700 Namita Khicha 4 1 1 1000 0.0152 Naresh V Rajawat 13 4 3 3200 0.0487 Asian Neela Khicha 16 3 6 4900 0.0745 Pawanben Valchand Jain 35 10 8 6900 0.1050 Pradeep Kothari 5 2 1 1980 0.0301 Reeta Naresh Rajawat 14 4 3 3200 0.0487 Sweta Bharat Kothari 10 2 4 2598 0.0395 Vinay Kothari 15 7 1 5090 0.0774 Total 176 50 42 42179 0.6417 KSL Hasmukh Valchand Jain 6 2 1 5000 0.0652

Hitesh Mahendra Jain 13 3 3 5195 0.0678 Kunal Dileep Kothari 6 2 1 6993 0.0912 Namita Khicha 5 1 1 4000 0.0522 Naresh V Rajawat 9 2 2 7000 0.0913 Neela Khicha 10 2 2 6000 0.0783 Pawanben Valchand Jain 12 2 2 4000 0.0522 Pradeep Kothari 11 4 1 10980 0.1432 Reeta Naresh Rajawat 12 3 3 6000 0.0783 Sweta Bharat Kothari 8 2 2 4000 0.0522 Vinay Kothari 7 2 2 9000 0.1174 Total 99 25 20 68168 0.8891 Hasmukh Valchand Jain 10 2 2 4250 0.0252 Hitesh Mahendra Jain 8 2 2 6600 0.0391 Kamlesh P Jain 19 5 4 10670 0.0633 Kunal Dileep Kothari 5 1 1 6600 0.0391 Naresh V Rajawat 4 1 1 2000 0.0119 Mavens Neela Khicha 3 1 1 4000 0.0237 Pawanben Valchand Jain 10 2 2 4500 0.0267 Reeta Naresh Rajawat 15 4 4 8680 0.0515 Shobha Dilip Kothari 4 1 1 1340 0.0079 Sweta Bharat Kothari 5 1 1 2000 0.0119 Total 83 20 19 50640 0.3003 MVL Total Anjana Mehta 2 2 0 600 0.0008 Anjana Mehta 19 8 6 6254 0.1158 Hitesh Mahendra Jain 23 6 8 12670 0.2347 Kamlesh P Jain 18 3 3 5666 0.1049 Kunal Dileep Kothari 8 2 2 3975 0.0736 Panaromic Neela Khicha 10 3 2 3330 0.0617 Pawanben Valchand Jain 19 5 5 10000 0.1852 Reeta Naresh Rajawat 38 9 9 20974 0.3885 Sweta Bharat Kothari 14 3 3 5960 0.1104 Total 149 39 38 68829 1.2749 Rasi Hasmukh Valchand Jain 5 1 1 1000 0.1256

Kamlesh P Jain 9 2 2 4000 0.5023 Kunal Dileep Kothari 4 1 1 2000 0.2511 Naresh V Rajawat 5 1 1 2000 0.2511 Pawanben Valchand Jain 5 1 1 1999 0.2510 Reeta Naresh Rajawat 12 2 2 4000 0.5023 Total 40 8 8 14999 1.8835 Anjana Mehta 13 6 3 6182 0.0907 Kunal Dileep Kothari 6 2 1 6000 0.0880 SIL Pawanben Valchand Jain 4 1 1 4000 0.0587 Vinay Kothari 2 1 0 2000 0.0293 Total 25 10 5 18182 0.2667 Hasmukh Valchand Jain 2 0 1 4801 0.0335 Hitesh Mahendra Jain 9 0 3 15000 0.1048 Kamlesh P Jain 4 0 2 6000 0.0419 Kunal Dileep Kothari 4 0 2 8700 0.0608 Namita Khicha 2 0 1 5000 0.0349 Naresh V Rajawat 2 0 1 4700 0.0328 Ushdev Neela Khicha 5 0 2 7500 0.0524 Pawanben Valchand Jain 6 0 3 9000 0.0629 Reeta Naresh Rajawat 11 0 5 22000 0.1537 Sweta Bharat Kothari 2 0 1 4000 0.0279 Vinay Kothari 5 0 2 10000 0.0699 Total 52 0 23 96701 0.6756 v. It was observed that Mr. Bhavesh Kothari controlled the activities of Money Magnet. He used to decide the scrip, price, quantity etc. on behalf of the said clients and in this manner a significant number of structured/synchronized trades were executed through Money Magnet's trading terminal. Soft copy of the relevant order/trade log details in respect of the said observations regarding execution of structured/synchronized trades were provided to Money Magnet in a CD/DVD attached to the Show Cause Notice dated March 12, 2012. The relevant details of the alleged manipulations in the said scrips and also the individual role of Bhavesh Kothari in the said manipulations, in collusion with others, were provided to Money Magnet in Annexure II to V to the said Show Cause Notice.

vi. DA had noted that Mr. Bhavesh Kothari had replied to the SCN vide letter dated April 10, 2012 in the capacity of partner of Money Magnet. DA had stated in the Report that Mr. Bhavesh Kothari had admitted the aforesaid violations and stated those to be unintentional mistake on his part, which he allegedly committed under influence of one Mr. Sunil Mehta.

8. In view of the said admission of the violations referred to in the SCN by Money Magnet, DA concluded that Money Magnet violated/contravened the aforesaid provisions of the PFUTP Regulations and the Brokers Regulations. For such violations, the suitable action in terms of regulation 27 of the SEBI Intermediaries Regulations include recommendation for suspension of certificate of registration for a specified period. However, it is noted from the submissions of Money Magnet that its certificate of registration as a sub-broker had already been cancelled. Further, its name is neither appearing on the BSE website nor on the NSE website as a sub-broker of India Capital Markets Pvt. Ltd. Money Magnet also furnished documents in support of its contention.

9. It is noted that certificate of registration granted to Money Magnet was surrendered and the SEBI Registration of Money Magnet as a sub-broker of India Capital Markets Pvt. Ltd. ended with effect from August 10, 2011.

10. Thus, it is evident from the said details that during the period May 18, 2007 o August 10, 2011 Money Magnet was registered with SEBI as a sub-broker. The aforesaid violation of the PFUTP Regulations and the Brokers Regulations were committed by it, while acting as a SEBI registered intermediary. Hence, such violation warrants a suitable action in terms of regulation 27 of the SEBI Intermediaries Regulation such as recommendation for suspension of certificate of registration for a specified period. However, the said recommendations would now become redundant as the certificate of registration of the Noticee has already been cancelled with effect from August 10, 2011. The DA had noted that Bhavesh Kothari (partner of the Sub broking firm) was the main person of the Noticee who was managing its day-to-day affairs and operations. Admittedly, he was the person responsible for the aforesaid manipulative acts of the Noticee.

11. In view of the above facts and circumstances, DA vide Report dated April 25, 2012 recommended in terms of regulation 27(iv)of the Intermediaries Regulations that "Bhavesh Kothari (PAN:

AABPK7614H) who was partner of the Money Magnet Securities (i.e. the Noticee) during the period when the aforesaid violations were committed by the Noticee, be debarred from being employed or associated with any registered intermediary or other registered person for a period of three years".

12. Thereafter, a show cause notice ("SCN") dated May 10, 2012 was issued along with a copy of enquiry report to Mr. Bhavesh Kothari (hereinafter referred to as "the Noticee"), partner of Money Magnet, under Regulation 28(1) of SEBI (Intermediaries) Regulation, 2008 calling upon him to show cause as why the penalty as recommended by the DA or any other higher penalty as deemed fit should not be imposed upon him. The Noticee, vide letter dated May 29, 2012 inter alia stated that he should not be debarred from being employed with or associated with any registered intermediary of other registered persons, for the reasons stated below: (i)"I have been debarred from trading in securities market vide SEBI Order No. WTM/KMA/IVD/385/05/2011 dated May 27, 2011 wherein the action has been taken for the same allegations mentioned in the investigation report attached with the current show cause notice. (ii) I have been associated with securities market since last 6 years and I am not in a position to restart a new line of activity taking into account my current age of 32 years, (iii) I have a family which is dependent on my income which can come only if I am employed and such order will result in not just hardships to me and my family, but will make me handicapped to provide them basic necessities food, clothing and education. (iv) I assure you that I will not be taking up any activity as mentioned in the investigation report, in violation of the regulatory framework of SEBI."

13. It is however, noted that the Noticee had not denied the alleged violations. The Noticee was granted an opportunity of personal hearing on March 19, 2014. During the personal hearing the Noticee had accepted the violations and requested for lenient view considering his life condition.

14. The Noticee has been debarred from dealing in the Securities Market vide order dated September 6, 2013 for a period of five years and the said period has been in operation since the date of the interim order i.e. May 27, 2011. I further note that the period of restraint imposed vide final order dated September 06, 2013 is in force till May 26, 2016. Considering the same I am of the view that as the Noticee has been prohibited from dealing in securities for a period of five years for the same violation, no further penalty is warranted in terms of the provisions of Regulation 28(1) of Securities and Exchange Board of India (Intermediaries ) Regulation 2008.

15. I, therefore, in exercise of the powers conferred upon me by virtue of Section 19 of Securities and Exchange Board of India Act, 1992 read with regulation 28(1) of Securities and Exchange Board of India (Intermediaries) Regulation 2008, hereby dispose of the show cause notice issued to the Noticee without further directions.

Place: Mumbai S. RAMAN WHOLE TIME MEMBER Date: June 16, 2015 SECURITIES AND EXCHANGE BOARD OF INDIA