Order in respect of Jasvantlal Vadilal Shah in the matter of Oasis Media Matrix Ltd

WTM/PS/02/IVD/ID-04/APR/2010 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI CORAM: PRASHANT SARAN, WHOLE TIME MEMBER IN THE MATTER OF OASIS MEDIA MATRIX LTD. In respect of Jasvantlal Vadilal Shah (SEBI Registration No. INB 020124815 & INS 010729312) 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 as ‘SEBI’) had conducted investigation into the buying, selling and dealing in the shares of Oasis Media Matrix Ltd. (hereinafter referred as ‘OMML’) during the period April 8, 2002 to July 9, 2002.

2. During the period under investigation, the price of the scrip opened at Rs.15.10 on April 8, 2002, touched a high of Rs.37.95 on July 9, 2002 and closed at Rs.35.50 on July 9, 2002. The volumes traded during the period of investigation were 6,45,492 shares in 64 days. The investigations revealed that the stock broker viz. Jasvantlal Vadilal Shah (hereinafter referred to as ‘noticee’), registered with SEBI as stock broker, bearing registration no. INB 020124815 and INS 010729312 had entered synchronized/ circular/ reversal trades on behalf of its clients which created artificial volume and price rise in the shares of OMML.

3. Based on the findings of the investigations, SEBI initiated enquiry proceedings against the noticee 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 vide order dated August 23, 2007 read with subsequent order dated December 10, 2008. SEBI appointed the Enquiry Officer, to enquire into the alleged violation of the provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 (since repealed) read with SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘PFUTP

Regulations’) and the Code of Conduct specified under Schedule II of SEBI (Stock Brokers and Sub-Broker) Regulation, 1992 (hereinafter referred to as ‘Broker Regulations’). As the Enquiry Regulations were repealed with effect from the notification of Securities and Exchange Board of India (Intermediaries) Regulations, 2008, the Enquiry Officer/ Designated Authority (hereinafter referred to as the Enquiry Officer) submitted his Report dated December 30, 2008, in terms of Regulation 27 of SEBI (Intermediaries) Regulations, 2008 recommending thereby warning to noticee for violating Clause A (2) of the Code of Conduct specified under Schedule II of the Broker Regulations.

4. Subsequently, a Show Cause Notice (hereinafter referred to as ‘SCN’) under Regulation 28(1) of SEBI (Intermediaries) Regulations, 2008 dated January 19, 2009, was issued by SEBI to the noticee, asking it to show cause as to why the appropriate penalty including penalty as recommended by the Enquiry Officer should not be imposed upon it. The noticee was advised to reply to the SCN, together with the documents that it may choose to rely upon in support of his reply within twenty one 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. A copy of the Enquiry Report was also forwarded to the noticee along with the said SCN.

5. Vide letter dated February 06, 2010, the daughter of noticee replied to the SCN and submitted that the matter is very old and they do not have material/ information/ record. She further requested for dropping of the proceedings as her father (the noticee herein) is 75 years old and has taken retirement from the business since 2004-2005. This letter of noticee had the signature of his daughter without any letter of authority to her. To cope up with this, an opportunity of personal hearing was granted to the noticee on April 09, 2010. This time again, the daughter of the noticee replied to the hearing notice dated March 22, 2010, vide her letter dated March 25, 2010 submitting that they do not require personal hearing and relied on their earlier replies. Taking in view of this. I proceed further in the matter.

6. I have carefully considered the Enquiry Report, the SCN issued to the noticee, reply thereto dated February 06, 2010 and letter dated March 25, 2010. I note that the Enquiry Officer has dropped the charge of violation of PFUTP Regulations. However, the Enquiry Officer has found the noticee guilty of violation of Clause A (2) of Code of Conduct specified under Schedule II of the Broker Regulations, as it has failed to exercise due skill, care and diligence in the conduct of business.

7. The noticee has made following submission vide its letter: • Had not derived any benefit and transacted as per the request of client. • Had no relationship with the client viz. Piyush Jhaveri. • Had not done any proprietary trading in the scrip. • Not in business since 2004-2005.

8. I note that the Enquiry Officer has not found any material on record to show link/ collusion between the noticee and his client or with the counter-party brokers/ clients. No clear indication to impute knowledge on part of the noticee and material to prove active role in manipulation has been found by the Enquiry Officer. The Enquiry Officer has concluded that it is the responsibility of a market intermediary to verify the credentials of its clients to ensure that no malpractice is taking place. The noticee should have enquired while enrolling his client as the client himself was the proprietor of a sub-broker.

9. I have seen the trades entered and the pattern followed by the client of the noticee while trading in the scrip of OMML, which appears to be structured in nature. I note that the noticee has not done any proprietary trading in the scrip of OMML during the relevant period of time. However, I find that it was the responsibility of the noticee to verify the transactions of its clients and was expected to ensure that no malpractice is taking place on its terminals by exercising proper skill, care and diligence. I note that the scrip of OMML was illiquid at the relevant point of time and the noticee should have raised alarm when trading took place from its terminal in this illiquid scrip. Further, I agree with the finding of Enquiry Officer that the noticee has failed to exercise proper due-diligence while enrolling his client Piyush Jhavery as he himself was the proprietor of a sub-broker, Shree Parshwa Finance who was also active in the subject scrip. I also agree that the noticee can not plead complete ignorance about this fact, as at the relevant point of time the noticee was an active market intermediary. In view of the above discussion, I have no hesitation to conclude that the noticee during the relevant period of time had failed to perform its duties as specified in the code of conduct for stock brokers in the Broker Regulations.

10. In view of above, I agree with the findings of the Enquiry Officer and conclude that the noticee had failed to act with due skill, care and diligence in the conduct of his business and has contravened the provisions of Regulation 7 read with clause A (2) of the Code of Conduct prescribed for stock brokers in the Broker Regulations.

11. I note that pursuant to the notification of the SEBI (Intermediaries) Regulations, 2008, the Enquiry Regulations have been repealed and in terms of Regulation 38(2) of the SEBI (Intermediaries) Regulations, 2008, notwithstanding such repeal, any enquiry commenced under the Enquiry Regulations, shall be deemed to have been commenced under the corresponding provisions of SEBI (Intermediaries) Regulations, 2008.

12. Taking into 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 Securities and Exchange Board of India (Intermediaries) Regulations, 2008, hereby warn the noticee, Jasvantlal Vadilal Shah (SEBI Registration No. INB 020124815 and INS 010729312) [PAN: ACZPS 3709H], to be careful and cautious in the conduct of its business and to adhere to and comply with all the statutory provisions while carrying out its activities in the securities market.

DATE : 7/4/2010 PRASHANT SARAN PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA