Order in respect of GKK Capital Market Pvt. Ltd.

WTM/RKA/ID-6/31/2013 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: RAJEEV KUMAR AGRAWAL, WHOLE TIME MEMBER ORDER Under Section 12(3) of the SEBI Act and read with regulation 28(2) of the SEBI (Intermediaries) Regulations, 2008 against GKK Capital Markets Pvt. Ltd.

In the matter of dealing in shares of Orient Trade Link Ltd.

1. GKK Capital Markets Pvt. Ltd. (hereinafter referred to as "the noticee") is a stock broker having SEBI Registration No. (INB030974733) and a member of Calcutta Stock Exchange Limited (CSE). The Securities and Exchange Board of India (SEBI) conducted investigations in respect of trading in the shares of M/s. Orient Trade Link Ltd. (hereinafter referred to as "OTL") for the period from July 01, 2002 to October 28, 2002 (hereinafter referred to as "Investigation Period"). 2. During the course of investigations, it was observed that the noticee was a registered client of TCP Stock Brokers Limited, [a stock broker of Bombay Stock Exchange Limited (BSE) and hereinafter referred to as 'TCP']. It was revealed that the noticee traded on BSE for its clients through TCP without obtaining registration as a sub-broker. It was also revealed that the noticee received third party payments against the purchases made by its clients and there were numerous matched trades executed by it on behalf of its client M/s. Vincomp Marketing Pvt. Ltd. (Vincomp). Further, the noticee did not comply with KYC requirements while registering its clients. Based on these findings of the investigations, it was alleged that the noticee aided and abetted its clients in creating artificial volume and misleading appearance of trading in OTL through matched trades and as a market intermediary it also failed to exercise due caution as to why such heavy trades as observed during the investigation were taking place in an illiquid scrip on behalf of the its clients. 3. Pursuant to the investigations, SEBI initiated proceedings against the noticee under regulations 25 read with regulations 38 of SEBI (Intermediaries) Regulations, 2008 (hereinafter referred to as "the Intermediaries Regulations"). The Designated Authority (DA) submitted her Report dated February 21, 2011 in accordance with the provisions of the Intermediaries Regulations wherein based on her the findings on alleged violations of the noticee, the DA recommended that the certificate of registration granted to the noticee as a stock broker be suspended for a period of one month.

4. After considering the Report of the DA, a show cause notice (SCN) dated April 06, 2011 was issued to the noticee under regulation 28(1) of the Intermediaries Regulations calling upon it to show cause as to why action as recommended by the DA should not be taken against it or higher penalty should not be imposed on it as deemed fit by the Competent Authority. The noticee chose to file a consent application which was rejected by SEBI. Thereafter, the noticee filed its reply to the SCN. The relevant contents of the reply of the noticee are reproduced hereunder: "We are in receipt of your letter on 30.04.2012 bearing reference no. IVD/ID6/BC/KM/OTL/9441/2012 dated April 27, 2012 regarding reply of Show Cause Notice (SCN) dated April 06, 201 is as follows:- We have repeatedly been in touch with your Designated Authorities as and when called by them with all the supporting documents along with satisfactory clarifications in your Mumbai and Kolkata office. In this connection please not that we have already let you know vide our letter dated 18.04.2011 that we have made violations but they were totally unwillingly and caused by the confusions created by the clients.

Hence, we would request you to kindly consider our case sympathetically as we are inactive brokers since 2004." 5. An opportunity of personal hearing was also granted to the noticee on December 20, 2012 and the same was intimated to the noticee vide letter dated December 06, 2012. While responding to the said notice, the noticee vide its letter dated December 11, 2012 and e-mail dated December 19, 2012 submitted that it has clarified /explained all points of OTL on various dates as called for hearing earlier. The noticee, however, exchanged further correspondence with regard to date of hearing and finally it confirmed that it had clarified all points and has nothing more to clarify or explain in the matter. 6. In the facts and circumstances of the case, I am of the view that sufficient opportunities of being heard have been granted to the noticee and the matter can be proceeded with on the basis of SCN, replies and relevant material available on record. Accordingly, I have carefully considered the Report, the SCN, submissions/ reply of the noticee and the relevant materials available on record.

7. Before dealing with the charges against the noticee, I deem it appropriate to briefly refer to the background of the case and facts found in the Report. I note that during the investigation period scrip of OTL was illiquid. During the said period, the price of the scrip fell from `13 on July 1, 2002 to ` 3.45 on October 28, 2002. Large volumes were observed in the scrip from August 30,

2002 to September 26, 2002 and October 16, 2002 to October 28, 2002 as given in the following Table: Table-1 -Price / Volume data Sr. No. Time Period Price / Volume Data 1. August 30, 2002 to Scrip opened at a price of ` 6.10 on August 30, 2002 and closed at a price September 26, 2002. of ` 6.80 on September 26, 2002. The total traded volume during this period was 25,71,934 shares 2. October 16, 2002 to Scrip opened at a price of ` 4.50 on October 16, 2002 and closed at a October 28, 2002 price of `3.45 on October 28, 2002 The total traded volume during this period was 26,14,934 shares.

8. Mr. Aushim Khetrapal (hereinafter referred to as 'Mr. Khetrapal' or 'Aushim', the Managing Director of OTL had raised huge loans from various persons including Mr. Dhody, Mr. Ved Prakash Narula and the noticee. As Mr. Khetrapal was not able to repay the loans, he transferred or arranged for transfers of huge quantities of shares of OTL, in September/ October, 2002, from persons including M/s Vincomp, a company owned and controlled by him, to his creditors; including Mr. Dhody/his company, M/s Pramukh and Mr. Ved Prakash Narula as described in the following Table: Table-2 -Manner of transfer shares in September/ October, 2002 in lieu of the money Owed by Mr. Khetrapal Sr. No. Transferred from Transferred to No. of shares 1 Prem Kumar Sharma DP A/c M/s Pramukh Securities Pvt. Ltd. DP 400000 No.10446961 A/c No.10020804 2 Rajesh Kumar Patel DP A/c M/s Pramukh Securities Pvt. Ltd. DP 900700 No.10000047 A/c No.10020804 3 M/s Vincomp Marketing Pvt. M/s Pramukh Securities Pvt. Ltd. DP 527500 Ltd. DP A/c No. 10014717 A/c No.10020804 4 M/s Vincomp Marketing Pvt. Mr. Ved Prakash Narula DP A/c No. 521400 Ltd. DP A/c No. 10014717 10010203 TOTAL 23,49,600 9. It has been observed that when Mr. Khetrapal’s creditors were selling shares of OTL in the market in order to recover their monies, Mr. Khetrapal/ Vincomp were placing huge buy orders for the same. On most of the occasions, the sell orders were placed first by one or the other creditors and then buy orders of huge quantities were entered by Mr. Khetrapal/Vincomp. At times, Mr. Khetrapal entered his bulk buy orders first and then sell orders were placed by one or more of the other parties.

10. It has been further observed that, during the investigation period, the noticee (as a sub-broker of TCP) bought 5,00,100 shares and sold 4,39,400 shares of OTL for Vincomp at BSE. Thus, it traded in total 9,39,500 shares (16.48% of total the market volume of 56,97,585 shares). The counter party to the sell orders of Vincomp for 4,22,800 shares (7.42% of the total market volume i.e. 56,97,585 shares), placed through the noticee, was Mr. Khetrapal trading through Kansal Brothers, a registered sub-broker of IKM (a stock broker and member of BSE). Such trades are given in the following Table: Table-3- Trades of the Noticee for Vincomp wherein Mr. Khetarpal was a counter party

Date No. of Selling Buying shares Client Client 16.10.2002 24,500 Vincomp Khetarpal 17.10.2002 23,000 -do- -do- 18.10.2002 17,600 -do- -do- 21.10.2002 17,500 -do- -do- 22.10.2002 15,000 -do- -do- 23.10.2002 19,000 -do- -do- 24.10.2002 11,200 -do- -do- 25.10.2002 2,95,000 -do- -do- Total 422800 11. The DA, in Annexure I to the Report, has cited complete detail of such matched trades and has found that those trades matched with the quantity, time and price. Few instances of such trades are given below: Buy Sell Buy Sell Buy Sell Tran Buy order order Time order order order order Tran Date Time Rate Qty Client Sell Client time time diff Rate Rate Qty Qty '2002-10-16' '10:32:12' 4.05 500 AUSHIM VINCOMP 10:32:11 10:02:01 0:30:10 4.05 4.05 500 500 '2002-10-16' '10:32:12' 4.05 500 AUSHIM VINCOMP 10:32:11 10:02:01 0:30:10 4.05 4.05 500 500 '2002-10-16' '10:32:12' 4.05 500 AUSHIM VINCOMP 10:32:11 10:02:01 0:30:10 4.05 4.05 500 500 '2002-10-16' '10:32:12' 4.05 500 AUSHIM VINCOMP 10:32:11 10:02:01 0:30:10 4.05 4.05 500 500 '2002-10-16' '10:32:12' 4.05 500 AUSHIM VINCOMP 10:32:11 10:02:01 0:30:10 4.05 4.05 500 500 '2002-10-16' '10:32:12' 4.05 500 AUSHIM VINCOMP 10:32:11 10:02:01 0:30:10 4.05 4.05 500 500 '2002-10-16' '10:32:12' 4.05 500 AUSHIM VINCOMP 10:32:11 10:02:01 0:30:10 4.05 4.05 500 500 '2002-10-16' '10:32:12' 4.05 500 AUSHIM VINCOMP 10:32:11 10:02:01 0:30:10 4.05 4.05 500 500 '2002-10-16' '10:32:12' 4.05 500 AUSHIM VINCOMP 10:32:11 10:02:01 0:30:10 4.05 4.05 500 500 '2002-10-16' '10:32:12' 4.05 500 AUSHIM VINCOMP 10:32:11 10:02:01 0:30:10 4.05 4.05 500 500 '2002-10-16' '10:32:37' 4.10 500 AUSHIM VINCOMP 10:32:36 10:01:41 0:30:55 4.1 4.1 500 500 '2002-10-16' '10:33:21' 4.10 500 AUSHIM VINCOMP 10:33:21 10:01:41 0:31:40 4.1 4.1 500 500 '2002-10-16' '10:33:21' 4.10 500 AUSHIM VINCOMP 10:33:21 10:01:41 0:31:40 4.1 4.1 500 500 '2002-10-16' '10:33:21' 4.10 500 AUSHIM VINCOMP 10:33:21 10:01:41 0:31:40 4.1 4.1 500 500 '2002-10-16' '10:33:21' 4.10 500 AUSHIM VINCOMP 10:33:21 10:01:41 0:31:40 4.1 4.1 500 500

'2002-10-16' '10:33:21' 4.10 500 AUSHIM VINCOMP 10:33:21 10:01:41 0:31:40 4.1 4.1 500 500 '2002-10-16' '10:33:21' 4.10 500 AUSHIM VINCOMP 10:33:21 10:01:41 0:31:40 4.1 4.1 500 500 '2002-10-16' '10:33:21' 4.10 500 AUSHIM VINCOMP 10:33:21 10:01:41 0:31:40 4.1 4.1 500 500 '2002-10-16' '10:33:21' 4.10 500 AUSHIM VINCOMP 10:33:21 10:01:41 0:31:40 4.1 4.1 500 500 '2002-10-16' '10:33:21' 4.10 500 AUSHIM VINCOMP 10:33:21 10:01:41 0:31:40 4.1 4.1 500 500 '2002-10-16' '11:19:22' 4.05 500 AUSHIM VINCOMP 11:19:22 11:10:41 0:08:41 4.1 4.1 500 500 '2002-10-16' '11:19:22' 4.05 500 AUSHIM VINCOMP 11:19:22 11:10:41 0:08:41 4.1 4.1 500 500 '2002-10-16' '11:19:22' 4.05 500 AUSHIM VINCOMP 11:19:22 11:10:41 0:08:41 4.1 4.1 500 500 '2002-10-16' '11:19:22' 4.05 500 AUSHIM VINCOMP 11:19:22 11:10:41 0:08:41 4.1 4.1 500 500 '2002-10-16' '11:19:22' 4.05 500 AUSHIM VINCOMP 11:19:22 11:10:41 0:08:41 4.1 4.1 500 500 '2002-10-16' '11:19:22' 4.05 500 AUSHIM VINCOMP 11:19:22 11:10:41 0:08:41 4.05 4.05 500 500 '2002-10-16' '11:19:22' 4.05 500 AUSHIM VINCOMP 11:19:22 11:10:41 0:08:41 4.05 4.05 500 500 '2002-10-16' '11:19:22' 4.05 500 AUSHIM VINCOMP 11:19:22 11:10:41 0:08:41 4.05 4.05 500 500 '2002-10-16' '11:19:22' 4.05 500 AUSHIM VINCOMP 11:19:22 11:10:41 0:08:41 4.05 4.05 500 500 '2002-10-16' '11:19:22' 4.05 500 AUSHIM VINCOMP 11:19:22 11:10:41 0:08:41 4.05 4.05 500 500 '2002-10-16' '11:19:22' 4.10 500 AUSHIM VINCOMP 11:19:22 11:10:47 0:08:35 4.05 4.05 500 500 '2002-10-16' '11:19:22' 4.10 500 AUSHIM VINCOMP 11:19:22 11:10:47 0:08:35 4.05 4.05 500 500 '2002-10-16' '11:19:22' 4.10 500 AUSHIM VINCOMP 11:19:22 11:10:47 0:08:35 4.05 4.05 500 500 '2002-10-16' '11:19:22' 4.10 500 AUSHIM VINCOMP 11:19:22 11:10:47 0:08:35 4.05 4.05 500 500 '2002-10-16' '11:19:22' 4.10 500 AUSHIM VINCOMP 11:19:22 11:10:47 0:08:35 4.05 4.05 500 500 '2002-10-16' '11:19:22' 4.10 500 AUSHIM VINCOMP 11:19:22 11:10:47 0:08:35 4.1 4.1 500 500 '2002-10-16' '11:19:22' 4.10 500 AUSHIM VINCOMP 11:19:22 11:10:47 0:08:35 4.1 4.1 500 500 '2002-10-16' '11:19:22' 4.10 500 AUSHIM VINCOMP 11:19:22 11:10:47 0:08:35 4.1 4.1 500 500 '2002-10-16' '11:19:22' 4.10 500 AUSHIM VINCOMP 11:19:22 11:10:47 0:08:35 4.1 4.1 500 500 '2002-10-16' '11:19:22' 4.10 500 AUSHIM VINCOMP 11:19:22 11:10:47 0:08:35 4.1 4.1 500 500 '2002-10-16' '14:16:33' 4.10 500 AUSHIM VINCOMP 14:16:33 11:31:22 2:45:11 4.1 4.1 500 500 '2002-10-16' '14:54:40' 4.10 500 AUSHIM VINCOMP 14:54:40 11:31:22 3:23:18 4.1 4.1 500 500 '2002-10-16' '14:54:40' 4.10 500 AUSHIM VINCOMP 14:54:40 11:31:22 3:23:18 4.1 4.1 500 500 '2002-10-16' '14:55:10' 4.10 500 AUSHIM VINCOMP 14:55:10 11:31:22 3:23:48 4.1 4.1 500 500 '2002-10-16' '14:55:10' 4.10 500 AUSHIM VINCOMP 14:55:10 11:31:22 3:23:48 4.1 4.1 500 500 '2002-10-16' '14:55:10' 4.10 500 AUSHIM VINCOMP 14:55:10 11:31:22 3:23:48 4.1 4.1 500 500 '2002-10-16' '14:55:10' 4.10 500 AUSHIM VINCOMP 14:55:10 11:31:22 3:23:48 4.1 4.1 500 500 '2002-10-16' '14:55:10' 4.10 500 AUSHIM VINCOMP 14:55:10 11:31:22 3:23:48 4.1 4.1 500 500 '2002-10-16' '14:55:10' 4.10 500 AUSHIM VINCOMP 14:55:10 11:31:22 3:23:48 4.1 4.1 500 500 Total: 24500

12. Such matched trades continued for a number of days and they constituted 7.42% of the total market volume (56,97,585 shares) of OTL during the investigation period. I note that Mr. Navin Khandelwal, (director of the noticee) stated before the Investigating Authority (IA) on November 03, 2004 that “…From Oct 16, 2002 we started selling the shares as we have to recover the amount and we have taken instruction from Aushim Khetrapal before placing the orders. When we were placing the sell orders the price, time and the quantity was well known to Mr. Aushim Khetrapal as he had instructed us during the period (Oct 16 - 25, 2002).” Thus, Mr. Khetrapal was well aware of the sell orders, the price and time of placement of orders by the noticee, therefore, the trades matched with the counterparty (Mr. Khetrapal himself) as the noticee had taken instructions from Mr. Khetrapal for executing those trades. Thus, the noticee aided and abetted Mr. Khetrapal in matching the trades which created artificial volume in the scrip of OTL. 13. On examination of the ledger account of Vincomp in the books of account of the noticee, purchases made by it for Vincomp and its submissions, the DA has found that the noticee had purchased 5,00,100 shares for Mr. Khetrapal’s front company Vincomp without taking adequate margins prior to entering into trades and had used its own funds for the purchases of Vincomp.

It was further observed that there was no transaction till September 18, 2002 when the very first cheque drawn on Global Trust Bank for ` 2,00,000 issued by Vincomp was dishonored. Thus, the ledger account had a debit balance of ` 2,00,000 as on September 18, 2002. The noticee bought 40000, 76000 and 30000 shares for Vincomp on September 20, 23 and 24, 2002 respectively and 80000, 105000 and 120500 shares on September 25, 26 and 27, 2002, respectively and that these large purchases resulted into a debit balance of `20,08,441. The noticee had submitted before the DA that:- "…. Vincomp had deposited a cheques of 2 lakh as margin before trading with us which was dishonored by Bank but committed at that time to issue another cheques to continue transaction. Relying on their commitment and also on request we had continued to buy in favour of them and in the mean time they had deposited some cheques and cash in Global Trust Bank, Mumbai on account.” Therefore, the DA has found that the noticee had not taken adequate margins from its client Vincomp and used its own fund for the purchases made by the said client.

14. Further, three cheques bearing numbers 545512, 545513 and 545514 drawn on the Bank of Punjab, New Delhi, issued by M/s Sri Sai Films to make payments on behalf of Vincomp against its purchases were received by the noticee and those cheque were dishonored when presented by the noticee for encashment. The DA has, thus, found that the noticee received third party cheques as payments against the purchases of Vincomp. Hence the debit balance of `20,08,441 increased to ` 23,61,757 as the noticee had already placed buy order for 46,000 shares for Vincomp on September 25, 2002. The DA has further observed that in spite of the cheques getting dishonored repeatedly, the noticee was placing orders for Vincomp, a front company of Mr. Khetrapal. The noticee ought to have exercised due care and diligence when the cheque got dishonored the very first time i.e. on September 18, 2002. However, admittedly, the noticee continued to place orders for its client Vincomp even after series of dishonor of cheques and when those purchases resulted into a debit balance in account of the client. 15. DA has also found that the noticee did not comply with the KYC requirements as many of the columns in the KYC form of its clients were left blank.

The noticee had submitted before the DA that :- “As Mr. Khetrapal was our trading client, on the assurance of Mr. Khetrapal and on good faith we have started dealing with Vincomp with some pending documents in KYC on the assurance of receiving the same shortly.” 16. It has been further observed from the KYC forms and the member-client agreements that the noticee entered into agreements with its clients in its capacity as a stock broker /member of CSE and not as a broker/sub broker authorized to trade on BSE. As per the agreements the noticee was thus, entitled to trade on behalf of its clients as a member at CSE only and not on BSE. Thus, the noticee traded on BSE through TCP on behalf of its clients without being registered as a sub-broker. 17. Based on the findings recorded in her Report, the DA found that - (a) the noticee aided and abetted its clients in carrying out manipulative trades and creation of artificial volume in the scrip of OTL, received third party cheques as payment against trades of its client, conducted trades for the clients without collecting margin and when the client was having debit balance in its account and failed to observe due care, caution and diligence while dealing with its clients, failed to abide by the provisions statutory requirements while dealing with its clients and violated the provisions of regulations 4(b) and (c) of SEBI(Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 1995 (PFUTP Regulations, 1995) and clauses A(1), A(2), A(3), A(4) and A(5) of the code of conduct for stock broker as specified under Schedule II read with regulation 7 of the SEBI (Stock Brokers and Sub-brokers)Regulations, 1992 (hereinafter referred to as "the Stock Brokers Regulations"); (b) the noticee traded as unregistered sub-brokers in the share of OTL on BSE during the investigation period and violated section 12(1) of SEBI Act and regulation 11(1) of the Stock Brokers Regulations.

18. Before dealing with the charges against the noticee as found in the Report, it is necessary to refer to the relevant provisions of the SEBI Act and the regulations. The provisions are reproduced hereunder- Section 12(1) of SEBI Act Registration of stock brokers, sub-brokers, share transfer agents, etc. 12. (1) No stock-broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market shall buy, sell or deal in securities except under, and in accordance with, the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under this Act:

Regulation 11(1) of Brokers Regulations Registration as sub-broker 11. (1) No sub-broker shall act as such unless he holds a certificate granted by the Board under these regulations. PFUTP Regulations, 1995 Prohibition against Market Manipulation 4. No person shall - (b) indulge in any act, which is calculated to create a false or misleading appearance of trading on the securities market; (c) indulge in any act which results in reflection of prices of securities based on transactions that are not genuine trade transactions;” PFUTP Regulations, 2003 Repeal and savings 13. (1) The Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 is hereby repealed. (2) Notwithstanding repeal of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995, any violation of regulations 3, 4, 5 and 6 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 shall be investigated and proceeded against in accordance with the procedure laid down in these regulations.

(3) Notwithstanding repeal of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995, any investigation pending, at the commencement of these regulations shall be continued and disposed of in accordance with the procedure laid down in these regulations.” Brokers Regulations- 7. The stock-broker holding a certificate shall at all times abide by the Code of Conduct as specified at Schedule II. SCHEDULE II Code of Conduct for Stock Brokers A. GENERAL (1) INTEGRITY: A stock-broker, shall maintain high standards of integrity, promptitude and fairness in the conduct of all his business. (2) EXERCISE OF DUE SKILL AND CARE: A stock-broker, shall act with due skill, care and diligence in the conduct of all his business. (3) MANIPULATION: A stock-broker shall not indulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumours with a view to distorting market equilibrium or making personal gains. (4) MALPRACTICES: A stock-broker shall not create false market either singly or in concert with others or indulge in any act detrimental to the investors interest or which leads to interference with the fair and smooth functioning of the market.

A stock-broker shall not involve himself in excessive speculative business in the market beyond reasonable levels not commensurate with his financial soundness. (5) COMPLIANCE WITH STATUTORY REQUIREMENTS: A stock-broker shall abide by all the provisions of the Act and the rules, regulations issued by the Government, the Board and the stock exchange from time to time as may be applicable to him.

19. There is no dispute as to the trades of the noticee for its client Vincomp as described in the Repot of the DA. It is further noted that the noticee had not disputed any of the allegations against it before the DA. I also note that in its reply dated May 02, 2012 the noticee has admitted that it had committed the violations found in the Report and has claimed that the violations happened "totally unwillingly" and were caused by the "confusions created by the clients". 20. I find that the acts and omissions of the noticee as found in the Report are established. I note that the trades executed by the noticee were not solitary but were carried out for a number of days that too in illiquid scrip like OTL. I further note from the Report that the noticee used two client codes (GKK and GK), one for buying and another for selling. It was aware of the scheme/plan of Mr. Khetrapal and it had taken instructions from him for executing matched trades between him and his connected entity Vincomp as found in the Report. Such trades created artificial volumes in the illiquid scrip of OTL. The noticee purchased shares for Vincomp without taking adequate margins and did not even undertake proper KYC for the said client.

Being a stock broker of CSE, the noticee was not permitted to trade as a stock broker of BSE unless it is registered as sub broker for trading at BSE. Despite the same, it traded for Vincomp at BSE as a stock broker. In my view, these acts and omissions of the noticee not only show its negligence and recklessness towards its statutory obligations but also indicate its active involvement and connivance in the trades of Mr. Khetrapal and Vincomp. In view of the facts found in the Report, I have no doubt that the noticee knowingly and intentionally indulged in the fraudulent and manipulative transactions of Mr. Khetrapal and Vincomp. Such deals interfere with the market mechanism. I, therefore, agree with the findings of the DA that the noticee had aided and abetted Mr. Khetrapal in matching the trades which created artificial volume in the scrip of OTL. 21. In my view, such trades are prone to disturb market equilibrium. The prohibited activities and types of contraventions as found by the DA in this case definitely have potential to disturb the market integrity and disturb the fair, equitable and efficient functioning of securities market.

Such transactions pose threat to the market integrity and orderly development of security market. Further, every broker has the responsibility to verify the credentials of its clients and not to indulge in fraudulent, manipulative and unfair trade practices. The stock broker is also expected to exercise due diligence in all its conducts and is expected to be especially cautious when trading when a client trades in substantial volumes. The noticee cannot plead complete ignorance and shrug off its responsibility as a stock broker.

22. I note that section 12(1) of the SEBI Act requires that no sub-broker shall buy, sell and deal in securities without a certificate of registration from the Board. Regulation 11(1) of the Stock Brokers Regulation mandates that no sub-broker shall act as such unless he holds a certificate granted by the Board. In this case, the noticee, traded for its clients as an unregistered sub-broker in the shares of OTL on BSE during the investigation period and thus it violated section 12(1) of SEBI Act and Regulations 11(1) of the Stock Brokers Regulations. 23. In the facts and circumstances as found in the Report, I find no reason to interfere with the findings of the DA. I note that the noticee had indulged in fraudulent and unfair dealings and had not taken due care and diligence in observance and compliance of the statutory requirement in conduct of its business as a stock broker. I, therefore, find that the noticee has violated the provisions of section 12 (1) of the SEBI Act, regulation 11(1) of the Stock Brokers Regulations and regulations 4(b) and 4(c) of PFUTP Regulations, 1995 read with regulation 13 of the PFUTP Regulations 2003 and clauses A(1), A(2), A(3), A(4) and A(5) of the Code of Conduct of Stock Brokers specified in Schedule II read with regulation 7 of the Stock Brokers Regulations.

24. I am satisfied that it is necessary to secure the proper management of the activity of the noticee. In my view, considering the facts and circumstances of this case and taking into account the interests of the investors, suspension of certificate of registration of the noticee for one month as recommended by the Designated Authority will be commensurate with the contraventions found in this matter. 25. I therefore, in the exercise of powers conferred upon me under section 19 read with section 12(3) of the SEBI Act, and regulation 28(2) of Intermediaries Regulations, hereby suspend the certificate of registration of the noticee i.e., GKK Capital Markets Pvt. Ltd. having SEBI Registration No. (INB030974733) as a stock broker and a member of Calcutta Stock Exchange Limited for a period of one month. 26. A copy of this order shall be served upon. GKK Capital Markets Pvt. Ltd. and to the Calcutta Stock Exchange Limited in accordance with regulation 30 of the SEBI (Intermediaries) Regulations, 2008 for necessary action. 27. This order shall come into force immediately on expiry of twenty one days from the date of this order.

RAJEEV KUMAR AGRAWAL Date: July 31, 2013 WHOLE TIME MEMBER Place: Mumbai SECURITIES AND EXCHANGE BOARD OF INDIA