Order in respect of Religare Securities Limited in the matter of trading activities of Ms Pooja Menghani

WTM/RKA/EFD / 121/2016 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA ORDER Under regulations 28(2) of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 in the matter of trading activity of Ms. Pooja Menghani. In respect of: Religare Securities Limited (PAN: AAACF1152D) – Stock Broker – BSE – (SEBI Registration Number – INB/INF/010653732); NSE – (SEBI Registration Number – INB/INF/INE 230653732)

1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') conducted an investigation into trades of one Ms. Pooja Menghani done through Religare Securities Limited (hereinafter referred to as 'Religare'), a SEBI registered stock broker, for the period June 01, 2008 to January 12, 2009 (hereinafter referred to as 'Investigation Period') in the shares of: (1) Amtek Auto Limited (‘Amtek Auto’); (2) Amtek India Limited (‘Amtek India’); (3) Ahmednagar Forgings Limited (‘Ahmednagar Forgings’); and (4) Monnet Ispat Limited (‘Monnet Ispat’). 2. Religare is a member of BSE and NSE and has been granted certificate of registration to act as a stock broker – BSE – (SEBI Registration Number – INB/INF/010653732); NSE – (SEBI Registration Number – INB/INF/INE 230653732). 3. Pursuant to the investigations, SEBI initiated proceedings against Religare under section 12(3) of the Securities and Exchange Board of India Act, 1992 (SEBI Act) read with Securities and Exchange Board of India (Intermediaries) Regulations, 2008 ('Intermediaries Regulations') and appointed a Designated Authority (hereinafter referred to as the “DA”).

4. After completing the proceedings, the DA submitted his Report dated July 09, 2014 (hereinafter referred to as the “Report”) wherein he, inter alia, found as under :

(1) During the investigation period, Ms. Pooja Menghani trading through Religare, Narayan Securities Pvt. Ltd. (‘Narayan’), India Infoline Securities Ltd. (‘India Infoline’) and ISF Securities Ltd. (‘ISF Securities’) had bought and sold equal quantities of shares in large volume in four scrips of Amtek Auto, Amtek India, Monnet Ispat and Ahmednagar Forgings. (2) She had traded during the entire investigation period. However, her trades in the above four scrips were limited to a few days. Further, majority of her trades were on the days

In respect of Religare Securities Limited when large buy trades of Live Star Marketing Pvt. Ltd. (‘Live Star’) and MSR Marketing Pvt. Ltd. (‘MSR Marketing’) were undertaken through Religare, and of SRS Portfolio Ltd. (‘SRS Portfolio’) through the stock broker Sunglow Capital Services Ltd. (‘Sunglow’). (Live Star, MSR Marketing and SRS Portfolio are hereinafter collectively referred to as ‘Major Buyers’) Trading in shares of Amtek Auto: (3) The details of trading of Ms. Pooja Menghani in Amtek Auto is as under:

Date Stock Pooja’s Buy Pooja’s Major Stock Matched Total Broker for quantity Sell Buy Broker of Buy Buy Pooja quantity client Major Quantity Quantit buyer of Major y of Buyer Major Buyer 02/07/08 India Infoline 40 ---- -- --- --- ------ 03/07/08 Narayan 16,275 16,275 SRS Sunglow 7,139 101,273 15/10/08 Religare 50,000 50,000 MSR Religare 50,000 121,000 16/10/08 Religare 28,000 28,000 MSR Religare 28,000 39,156 17/10/08 Religare 6,324 6,324 CF1 Sunglow 5,717 67,000 20/10/08 Religare 23,547 23,547 MSR Religare 23,544 41,684 23/10/08 Religare 26,605 26,605 MSR Religare 26,605 72,000 24/10/08 Religare 14,061 14,061 MSR Religare 14,060 18,134 31/10/08 Religare 50,000 50,000 MSR Religare 50,000 110,000 07/11/08 ISF 18,180 18,180 MSR Religare 15,033 23,700 10/11/08 ISF 34,560 34,560 MSR Religare 29,005 43,000 12/11/08 ISF 10,000 10,000 MSR Religare 9,843 20,000 17/11/08 Religare 40,000 40,000 ---- ---- --- 26/11/08 ISF 50,000 50,000 MSR Religare 50,000 52,039 28/11/08 ISF 2,362 2,362 ---- ----- ----

Total 3,69,954 3,69,914 3,08,946 7,08,986 (4) From the above table it is observed that Ms. Pooja Menghani traded in the scrip of Amtek Auto through Religare for 15 days whereby she had bought 3,69,954 shares and sold 3,69,914 shares. Further, on 14 days, Ms. Pooja Menghani squared off position at the end of each day. Out of 15 days, on 10 days, sell orders of Ms. Pooja Menghani matched with the buy orders placed by MSR Marketing through Religare constituting 2,96,090 shares, which is 80.4% of gross sell volume of Ms. Pooja Menghani. (5) It is also observed that Ms. Pooja Menghani was buying and selling equal quantities on all days except on July 2, 2008 when she bought only 40 shares. It is noticed that out of 15 instances, only in 3 instances Religare was not the stock broker at either side (buy/sale). In 6 instances, the Religare was the stock broker of both Ms. Pooja Menghani as well as MSR Marketing and on other 6 instances, Religare was at one side of order and on other side other stock broker was there. Thus, in 12 instances, Religare was acting as stock broker for Ms. Pooja Menghani or Major Buyers. Therefore, Religare was acting as stock broker for Ms. Pooja Menghani in major instances.

(6) A detailed analysis of order time of Ms. Pooja Menghani and MSR Marketing during the investigation is as under:

Date Pooja’s Buying/ Pooja’s Limit Sell LTP prior MSR Marketing MSR (Selling) Price range to order entry Buy order period Marketing Period (Order Log) Buy Limit Price 15/10/2010 12:01:05 to 15:17:09 101.5 to 105 NA NA NA 15:11:13 to 15:11:52 108.5 to 109 102.6 15:12:35 to 15:24:53 102 to 110 16/10/2008 13:05:56 to 14:39:23 93 to 103 NA NA NA 14:39:51 105 101 14:39:56 to 14:40:32 102 to 105 20/10/2008 12:32:23 to 15:14:33 100.5 to 103 NA NA NA 15:13:39 to 15:15:00 105.5 to 106 103 to 103.9 12:40:43 to 15:17:58 101.5 to 106 23/10/2008 10:19:27 to 12:52:16 85 to 87 NA NA NA 13:53:46 89.9 89.1 10:21:39 to 14:15:40 85 to 90 24/10/2008 12:20:56 to 12:21:07 66.5 to 67 NA NA NA 13:03:24 69 68.05 12:41:50 to 13:04:50 67.5 to 69 31/10/2008 14:33:51 to 15:11:32 72 to 73 NA NA NA 15:13:46 75 72.5 15:00:32 to 15:16:54 72 to 75.5 07/11/2008 13:21:12 to15:16;22 69 to 71 NA NA NA 15:02:46 to 15;23:54 70 to 70.9 70.6 to 71.9 15:08:37 to 15:25:11 70 to 70.9 10/11/2008 11:24:33 to 13:49:40 68.5 to 69.6 NA NA NA 13:40:25 71 69.95 14:28:12 to 14:28:55 71 12/11/2008 14:38:40 to 15;02:25 63.5 to 64.5 NA NA NA 15:08:13 65.8 63.35 15:10:58 to 15:18:52 64 to 66 26/11/2008 13:23:54 to 15:22:47 45.85 to 50.5 NA NA NA 15:23:34 49.80 49.4 15:23:33 49.85 (7) It is observed that on the days when Ms. Pooja Menghani's sell orders have matched with the buy orders of MSR Marketing, she placed orders at lower price prior to the buy orders of MSR Marketing. Further, Ms. Pooja Menghani’s sell order limit price was always above the sell LTP prior to the order entry, and was almost same or very close to the buy limit price of MSR Marketing. The price volume data for the trading in the scrip of Amtek Auto on the days when Ms. Pooja Menghani’s sell orders have matched with the buy orders of MSR Marketing was as follows:

Sl. No. Date Open High Low Price Close Price Total Price Price Traded Quantity 1 15-Oct-08 106.85 109.35 101.5 105.85 256613 2 16-Oct-08 97 106 87 103.05 116841 3 20-Oct-08 103 106 100.05 104.5 127873 4 23-Oct-08 82.25 90.4 81.05 83.7 431762 5 24-Oct-08 82 82.8 58.1 74.05 240516 6 31-Oct-08 73.1 75 70.5 73.5 224809 7 7-Nov-08 70 74 66.5 70.3 197893 8 10-Nov-08 70 71.95 68.5 69.6 190474 9 12-Nov-08 63 65.8 62.25 64.45 131920 10 26-Nov-08 43.8 50.85 43.4 49.05 208699 (8) From the above table, it is observed that the price of Amtek Auto was continuously falling over this period as the scrip which opened at `106.85 on October 15, 2008 and finally closed at `49.05 on November 26, 2008. It is observed that around `56 fell down (around 52%) in the said scrip within just 42 days. On comparing the price volume table with the table containing analysis of orders placed by Ms. Pooja Menghani and MSR Marketing, it is observed that Ms. Pooja' Menghani’s sell order limit price which was always above the sell LTP and was same or very close to the buy limit price of MSR Marketing. It was also close to the highest price reached on NSE on those days. (9) Further, it is observed from the available records that the sell orders/first sell order of Ms. Pooja Menghani on October 15, 2008, October 16, 2008, November 7, 2008 and November 12, 2008 were immediately ahead of the first buy orders from MSR Marketing. Religare was the stock broker for MSR Marketing on all these days. Religare was the stock broker for Ms. Pooja Menghani on October 15, 2008 and October 16, 2008 and ISF was the broker for Pooja on November 7, 2008, November 12, 2008 and November 26, 2008. However, it is noted that on all these days, Ms. Pooja Menghani had started buying shares substantially (for example- 50,000 shares October 15, 2008) prior to the first buy order from MSR Marketing. Trading in shares of Amtek India: (10) From NSE trade log it is observed that during June 2008 to January 2009, Ms. Pooja Menghani had traded on the following days:

Date Broker for Pooja’s Pooja’s Counter Counter Matched Total Buy Pooja Buy Sell Major Sell Buy Quantity Menghani quantity quantity Buy Broker of Quantity of of Major client Major Counter Buy Client client Major Buy client 1/07/2008 Religare 10,000 10,000 CF3 Sunglow 9,999 136,104 Narayan 10,000 10,000 CF3 Sunglow 8,459 11/11/2008 ISF 26,805 26,805 MP3252 Religare 26,418 35,000 12/11/2008 ISF 10,000 10,000 MP3252 Religare 10,000 20,000 25/11/2008 ISF 90,000 90,000 MP3252 Religare 89,996 174,000 26/11/2008 ISF 30,000 30,000 MP3252 Religare 30,000 35,767 28/11/2008 ISF 80,000 80,000 MP3252 Religare 75,343 175,000 01/12/2008 ISF 90,000 90,000 MP3252 Religare 90,000 149,000 02/12/2008 ISF 90,000 90,000 MP3252 Religare 88,032 254,000 03/12/2008 ISF 90,000 90,000 MP3252 Religare 90,000 222,420 04/12/2008 ISF 102,481 102,481 MP3252 Religare 90,000 511,000 (MP 3252 : MSR Marketing // CF 3: SRS Portfolio) (11) It is observed from the above table that Ms. Pooja Menghani had traded on 10 days in the said scrip, whereby she had bought a total of 6,29,286 shares and sold the same number of shares. Further, she has squared off her position at the end of each day. Out of 10 days, on 9 days the sell orders placed by Ms. Pooja Menghani through ISF Securities had matched with the buy orders placed by MSR Marketing trading through Religare, which constitutes 93.72% of Ms. Pooja Menghani’s gross sell. Further, during the period, Ms. Pooja Menghani was buying and selling equal quantities on each day and on 9 days her sell orders through stock broker ISF Securities have substantially matched with the buy orders of MSR Marketing, trading through Religare. Since, majority of the sell orders of Ms. Pooja Menghani had matched with MSR Marketing, a detailed analysis of order time placed during the investigation, is as under:

Date Pooja’s Buying/ Pooja’s Limit Sell LTP MSR Marketing MSR (Selling) Price range prior to order Buy Marketing Period (Order Log) entry order period Buy Limit Price 11/11/2008 13:44:24 to 15;17:56 38.5 to 39 NA NA NA 15:22:56 38 to 40.6 39.15 15:23:09 to 40.65 to 40.7 15:23:36 12/11/2008 13:26:48 to 14:49:10 39 NA NA NA 15:07:32 40.7 39 15:11:31 to 40 to 41 15:19:29 25/11/2008 11:31:59 to 14:15:10 18.9 to 19 NA NA NA

14:15:29 20.25 to 20.5 19 14:16:09 to 20.5 14:16:59 26/11/2008 12:26:50 to 15:09:43 19.5 to 21 NA NA NA 15:16:30 21.65 20.55 15:16:33 21.65 28/11/2008 14:56:06 to 15:17:49 21.5 to 22.5 NA NA NA 15:18:31 21.25 to 23.3 22 15:17:16 to 23.3 to 23.35 15:20:30 1/12/2008 13:35:35 to 15:09:00 21.9 to 22.1 NA NA NA 15:09:21 23.9 22 15:10:23 to 24 15:10:28 2/12/2008 13:47:07 to 14:38:35 21 to 21.6 NA NA NA 15:09:28 22.5 to 23.2 21.2 15:09:36 to 22.5 to 23.25 15:11:19 3/12/2008 12:54:36 to 15:09:24 20.95 to 22 NA NA NA 15:08:58 22.5 21.3 15:10:12 to 22.5 to 23.1 15:13:22 4/12/2008 14:02:11 to 14;37:45 21.9 to 22.1 NA NA NA 14:17:04 to 14:29:17 22.75 to 23.1 21.95 to 23.25 14:17:49 to 23 to 24.1 14:25:48 (12) Further, the NSE price volume data for the trading in the scrip of Amtek India on the days when Ms. Pooja Menghani’s sell orders have matched with the buy orders of MSR Marketing was as follows:

Sl. No. Date Open Price High Low Close Total Traded Price Price Price Quantity 1 11-Nov-08 38.35 40.8 38.1 40.35 94519 2 12-Nov-08 42 42 38 40 40579 3 25-Nov-08 19.25 20.7 18.6 19.65 377453 4 26-Nov-08 20.5 21.65 19.15 21.25 107535 5 28-Nov-08 21.7 23.3 20.55 22.45 341634 6 1-Dec-08 22.3 24 20.75 22.75 434390 7 2-Dec-08 21.45 23.2 20.55 22.05 903918 8 3-Dec-08 21 22.85 20.6 22.3 589060 9 4-Dec-08 21.6 23.5 20.6 21 1342845 (13) It can be observed that price of Amtek India was also falling over this period as the scrip which opened at `38.35 on November 11, 2008 finally closed at `21 on December 04, 2008. On comparison of the price volume table with the table containing analysis of orders of Ms. Pooja Menghani and MSR Marketing, it is observed that Ms. Pooja Menghani’s sell order limit price which was above the sell LTP and was close to the buy limit price of MSR Marketing, was also close to the highest price reached on NSE on those days.

(14) It is also observed that the sell order/first sell order of Ms. Pooja Menghani was immediately prior to the first buy order of MSR Marketing on all the above days except on November 28, 2008. ISF Securities was the stock broker for Ms. Pooja Menghani and Religare was the stock broker for MSR Marketing on these days.

(15) From the above, it is observed that in the scrip of Amtek India, in all 11 instances on ten days, except for the trade on July 01, 2008, Ms. Pooja Menghani and the Major Buyers (MSR Marketing) were placing their respective orders through different stock brokers. However, the fact cannot be ignored that since Mr. Deepak Khurana was having information of price/quantity of MSR Marketing's order and it is not necessary that to communicate such information, Religare should also be on other side as stock broker for Ms. Pooja Menghani, as such information can be communicated by Religare through various modes including telephonic discussions (such telephonic discussion in fact is admitted in statement of Ms. Pooja Menghani and reply of Mr. Deepak Khurana). Trading in shares of Ahmednagar Forgings: (16) From NSE trade log it is observed that during June 2008 to January 2009, Ms. Pooja Menghani had traded in the scrip of Ahmednagar Forgings on the following days:

Date Broker for Pooja’s Pooja’s Counter Counter Matched Buy Total Buy Pooja Buy Sell Major Sell Broker Quantity of Quantity of Menghani quantity quantity Buy of Major Counter Major Buy client client Major Buy Client client 04/07/2008 Narayan 12,000 12,000 CF3 Sunglow 11,998 54,169 09/07/2008 Narayan 4,764 4,764 CF3 Sunglow 4,764 15,000 11/07/2008 Narayan 10,000 10,000 CF3 Sunglow 9,797 45,299 16/07/2008 Narayan 7,438 7,438 CF3 Sunglow 7,438 54,606 17/07/2008 Narayan 647 647 CF3 Sunglow 647 6,339 18/07/2008 Narayan 3,438 3,438 CF3 Sunglow 3,438 5,054 21/07/2008 Narayan 6,921 6,921 CF3 Sunglow 6,921 10,000 22/07/2008 Narayan 4,669 4,669 21/10/2008 Religare 90,000 90,000 MP3252 Religare 90,000 124,617 24/10/2008 Religare 45,986 45,986 MP3252 Religare 45,166 73,000 03/11/2008 Religare 121,016 121,016 MP3252 Religare 121,016 206,101 04/11/2008 Religare 90,000 90,000 MP3252 Religare 76,407 240,000 11/11/2008 ISF 21,000 21,000 MP3252 Religare 21,000 35,000 12/11/2008 ISF 9,347 9,347 MP3252 Religare 9,347 20,000 17/11/2008 ISF 75,000 75,000 MP3252 Religare 74,999 139,939 03/12/2008 ISF 38,038 38,038 MP3252 Religare 37,236 50,000 Total 5,40,264 5,40,264 5,20,174 10,79,124 (MP 3252: MSR Marketing // CF 3: SRS Portfolio)

(17) It is observed from the above table that during the investigation period, Ms. Pooja Menghani had traded for 16 days, whereby she had bought a total of 5,40,264 shares and sold the same numbers of shares without taking delivery of shares. She had squared off her position at the end of each day.

(18) It is also observed that her trades were concentrated on few days in July 2008 when on 8 days her sell orders through stock broker Narayan have substantially matched with the buy orders of SRS Portfolio trading through stock broker Sunglow. Since, the said orders/trades were executed by Ms. Pooja Menghani and SRS Portfolio through different stock brokers and not through Religare, hence the same are not considered against Religare.

(19) However, on another 8 days in October/November/December 2008, her sell orders through Religare/ISF Securities have substantially matched (around 97%) with the buy orders of MSR Marketing trading through stock broker Religare. It is also noticed that in 4 instances/orders/trades, Religare was the stock broker for both Ms. Pooja Menghani as well as MSR Marketing. The analysis of orders placed by Ms. Pooja Menghani, SRS Portfolio and MSR Marketing is as under: Orders placed by Ms. Pooja Menghani and MSR Marketing Date Pooja Menghani’s Pooja Sell LTP MP3252 MP3252 Buying/ (Selling) Menghani’s prior to (MSR) Buy (MSR) Buy Period (Order Log) Limit order entry order period Limit Price Price range 21/10/2008 12:28:20 to 13:14:35 45 NA NA NA 13:38:59 to 13:39:47 53.5 to 54.5 48 to 48.9 13:15:27 to 45 to 55 13:43:29 24/10/2008 11:13:31 to 15:17:05 33 to 39.25 NA NA NA 11:51:06 to 15:23:07 35 to 39 32.5 to 11:53:54 to 33 to39 38.35 15:23:34 3/11/2008 11:44:10 to 15:15:16 32 to 37.5 NA NA NA 13:07:12 to 15:18:19 36.45 to 36.95 32.9 to 34.4 11:48:00 to 32 to 37 15:18:37 4/11/2008 12:03:31 to 12:06:29 32.5 NA NA NA 13;50:53 to 13:51:30 35 to 37.4 33.5 13:42:00 to 32.5 to 38 13:59:10 11/11/2008 13:24:44 to 14:08:57 31.5 to 32.1 NA NA NA 14:54:01 33 31.2 14:59:31 to 33 to 33.05 14:59:56 12/11/2008 13:26:57 to 14:49:45 29.85 to 30.5 NA NA NA 15:05:36 31.8 30 15:10:22 to 31 to 32 15;19:16

17/11/2008 12:28:58 to 13:45:22 25.55 to 26.25 NA NA NA 14:00:40 27.5 25.55 13:21:46 to 25.55 to 27.55 14;01:15 3/12/2008 13:35:55 to 14:42:46 21.95 to 22 NA NA NA 15:14:54 22 to 23 22 15:15:15 23 (20) From the above table, it is observed that on the days when Ms. Pooja Menghani’s sell orders have matched with the buy orders of MSR Marketing, she has bought at lower prices prior to the buy orders of MSR Marketing. Further, her sell order limit price was above the sell LTP prior to the order entry, but was close to the buy limit price of MSR Marketing. Further, the sell order / first sell order placed by Ms. Pooja Menghani were immediately ahead of the first buy orders of MSR Marketing on October 24, 2008, November 11, 2008, November 12, 2008 and December 3, 2008. Religare was the stock broker for Ms. Pooja Menghani as well as MSR Marketing on October 21 and 24 and November 03 and 04 of 2008. On the other days, ISF Securities was the stock broker for Ms. Pooja Menghani and Religare was the stock broker for MSR Marketing.

(21) The NSE price volume data for the trading in the scrip of Ahmednagar Forgings on the days when Ms. Pooja Menghani’s sell orders have matched with the buy orders of MSR Marketing, are as follows:

Sl. No. Date Open Price High Price Low Price Close Price Total Traded Quantity 1 21-Oct-08 50.05 54.5 45 47.85 291085 2 24-Oct-08 40 40 31.45 33.8 152777 3 3-Nov-08 37 37.3 32 35.35 529082 4 4-Nov-08 35 37.4 32.25 34 534195 5 11-Nov-08 32.2 33 30.7 31.3 89370 6 12-Nov-08 31.9 31.9 29.2 30.9 59411 7 17-Nov-08 28.5 28.5 25.55 25.55 321104 8 3-Dec-08 22.5 23 21.25 22.85 165389 (22) As observed from the above table, price of the scrip of Ahmednagar Forgings was falling over this period as the scrip which opened at `50.05 on October 21, 2008 finally closed at `22.85 on December 03, 2008. When the above price volume table was compared with the table containing analysis of orders of Ms. Pooja Menghani and MSR Marketing, it is revealed that Ms. Pooja Menghani’s sell order limit price which was always above the sell LTP and was same or very close to the buy limit price of MSR Marketing, was also close to the highest price reached on NSE on those days.

Trading in shares of Monnet Ispat: (23) From NSE trade log it is observed that during June 2008 to January 2009, Ms. Pooja Menghani has traded in the scrip of Monnet Ispat on the following days:

Date Broker for Pooja’s Pooja’s Counter Counter Matched Buy Total Buy Pooja Buy Sell Major Sell Quantity of Quantity of Menghani quantity quantity Buy Broker of Counter Major Buy client Major Major Buy Client client client 27/06/2008 Religare 10000 10000 ML526 Religare 5000 70000 India Infoline 2500 2500 ML526 Religare 1500 30/06/2008 Religare 5000 5000 LP187 Religare 5000 184501 India Infoline 2000 2000 LP187 Religare 2000 Narayan 10000 10000 LP187 Religare 10000 01/07/2008 Religare 5000 5000 LP187 Religare 5000 27166 India Infoline 2500 2500 LP187 Religare 2500 Narayan 10000 10000 LP187 Religare 5465 02/07/2008 Narayan 8000 8000 LP187 Religare 8000 33858 03/07/2008 Narayan 10000 10000 LP187 Religare 6667 29000 04/07/2008 Narayan 2700 2700 LP187 Religare 1413 10000 07/07/2008 Narayan 10000 10000 LP187 Religare 9597 15864 09/07/2008 Narayan 10000 10000 LP187 Religare 9761 50285 (LP187: Live Star)

(24) Ms. Pooja Menghani had traded in the said scrip for 8 days from June 27, 2008 to July 09, 2008 wherein she was buying and selling equal quantities on each day. She had bought a total of 87,700 shares and sold the same numbers of shares. On 7 days, her sell orders through stock brokers Religare / India Infoline / Narayan have substantially matched with the buy orders of Live Star who was trading through Religare, which constitutes 74.57% of her gross trading.

(25) On two days, Religare was the stock broker at both side of Ms. Pooja Menghani and Live Star. It is also observed that majority of the sell orders of Ms. Pooja Menghani had matched with the buy orders of Live Star. A detailed analysis of order time of Ms. Pooja Menghani and that of Live Star done revealed as under:

Date Pooja’s Buying/ Pooja’s Limit Sell LTP LP187 Buy LP187 Buy (Selling) Price range prior to order order period Limit Price Period (Order Log) entry 30/06/2008 (R) 10:48:46 520 NA NA NA (N) 10:52:01 to 11:36:37 519 to 520 (I) 10:51:51 520 (R) 11:34:24 519.95 to 530 519 09:55:25 to 515 to 531 (N) 11:37:00 520 to 530 520 15:22:36 (I) 11:31:22 520 to 530 519.7 01/07/2008 (R) 11:12:38 to 12:47:27 510 to 512 NA NA NA (N) 11:08:30 to 12:51:12 510 to 513 (I) 11:58;06 510 (R) 13:34:16 515 510 10:04:54 to 495 to 525 (N) 13:39:33 to 14:02:29 508 to 512 512 to 515.95 15:17:18 (I) 13:29:21 510 to 514 510 02/07/2008 12:25:21 to 14:10:17 485 to 490 NA NA NA 14:10:58 497 490 11:15:16 to 465 to 510 15:29:05 03/07/2008 11:13:22 to 11:23:41 485 NA NA NA 15:20:49 to 15:24:43 490 490 to 496 13:29:39 to 467 to 500 15:25:41 04/07/2008 11:44:52 to 14:39:50 487 to 494 NA NA NA 14;38;45 499 495 14:48:04 to 496 to 510 15:29:47 07/07/2008 14:03:55 to 15:22:14 505 to 509.5 NA NA NA 15:24:04 to 15:51:37 510 509 10:35:07 to 509.05 to 520 15:50:16 09/07/2008 13:53:07 to 14:25:08 501 to 502.5 NA NA NA 14:26:45 to 15:27:18 503.1 to 507 502 to 505.95 14:56;32 to 497 to 510 15:29:50 (26) The NSE price volume data for the trading in the scrip of Monnet Ispat on the days when Ms. Pooja Menghani’s sell orders matched with the buy orders of Live Star is as follows:

Sl. No. Date Open High Low Close Total Traded Price Price Price Price Quantity 1 30-Jun-08 524.95 530 503 517.45 268000 2 1-Jul-08 511.15 525 476.25 498.55 140372 3 2-Jul-08 504.65 509.75 462 497.4 83337 4 3-Jul-08 485 502 463 493.8 77118 5 4-Jul-08 492 505 483 501 36054 6 7-Jul-08 515 529 501 509.05 54187 7 9-Jul-08 548.9 558.9 495.1 504.5 100203 (27) From the above table, it can be observed that price of Monnet Ispat was falling over this period as the scrip which opened at `524.95 on June 30, 2008 has closed at `504.5 on July 09, 2008. Further, as usual like aforesaid scrips, it is observed that on the days when Ms. Pooja Menghani’s sell orders matched with the buy orders of Live Star, she had bought at lower prices prior to the buy orders of Live Star. Further, her sell order limit price was above the sell LTP prior to the order entry, and was close to the buy limit price of Live Star.

(28) On July 03, 2008 and July 04, 2008, Ms. Pooja Menghani placed her sell order immediately ahead of the buy order from Live Star. Ms. Pooja Menghnai was placing order through stock broker Narayan whereas the counterparty stock broker was Religare.

(29) Keeping in view the aforesaid facts and analysis of the trading of the client Ms. Pooja Menghani which was executed through Religare in the aforesaid four scrips, the following are key points: (a) Substantial number of shares was purchased/sold by Ms. Pooja Menghani in the aforesaid 4 scrips and almost 100% squared off by her on the same day. (b) Considerable instances wherein Religare was the stock broker for both Ms. Pooja Menghani and other Major Buyers. (c) There are considerable instances where the sell orders/first sell orders of Ms. Pooja Menghani were immediately ahead of the large buy orders of the Major Buyers and same were executed through Religare. (d) Ms. Pooja Menghani's sell order limit price was always above the sell LTP or very close to the buy limit price of the Major Buyers.

(30) Further, the fact of placing orders consistently by Ms. Pooja Menghani ahead of the large buy orders of Major Buyers and that her trades were limited to a few days in the four scrips, indicate that her trading ahead of the large buy orders cannot always be a coincidence, but were done with a prior knowledge regarding the imminent large buy orders of Major Buyers.

(31) It is an established fact that Mr. Deepak Khurana had introduced Ms. Pooja Menghani to Religare and was placing orders for both Ms. Pooja Menghani as well as the Major Buyers on several occasions. Certainly, such orders were placed by Ms. Pooja Menghani upon receiving information from Religare/Mr. Deepak Khurana about imminent orders of the Major Buyers as alleged.

(32) As regards to the income of Ms. Pooja Menghani, it was submitted by Religare that Ms. Pooja Menghani was maintaining running account of funds and securities with it and her trading was allowed based on standard risk and margin procedures. However, in support of such contention, no documentary proof were filed in the proceeding.

(33) As regards the contention of Religare that it is a normal practice for the dealers to interact with clients to discuss market behaviour, it is relevant to mention here that Ms. Pooja Menghani was not shown to be a High Networth Individual or/ Institutional Investor wherein some stock broker would discuss over phone about market behaviour, especially when Religare was having thousands of other clients in the same branch.

(34) The contentions of Religare that nominal percentage of such transactions took place from its platform, source of passing information was some other third person outside Religare and that only `28.9 lac was booked by Ms. Pooja Menghani through Religare and remaining `19.1 lac was booked through other stock brokers, are not tenable in view of the Hon'ble SAT order in the matter of Ms. Pooja Menghani vs. SEBI (Appeal No. 20/2014 – order dated April 23, 2014), whereby the Hon’ble SAT has upheld the adjudication order in respect of Ms. Pooja Menghani.

(35) Since, Mr. Deepak Khurana who was one of the branch heads of Religare, had placed such orders from its platform, hence, being a registered stock broker, Religare should have exercised adequate care/caution and should have suitably advised/cautioned its employees about the practices to be followed in its business. Under law, duty is cast upon the registered stock broker to adequately instruct its employees to render fair services to its clients and not to indulge in any kind of manipulative/fraudulent activities during the course of its business. As observed above, such kinds of trading was assisted by Religare to Ms. Pooja Menghani for a long time viz. from July to December 2008. Apparently, there was failure on the part of Religare in adopting due diligence and also there was indulgence on its part in front running/manipulative/fraudulent activities. Undoubtedly, passing of such information/front running assisted Ms. Pooja Menghani in placing buy orders for shares at lower price and subsequently selling them at higher price which resulted into huge profit of around `28.9 lakh to her through Religare.

Therefore, the allegations as levelled in the SCN dated June 20, 2011 against Religare, stands established. (36) Religare had violated clauses A(1), A(2), A(3), A(4), A(5) and B(3) of the code of conduct for stock brokers as prescribed under Schedule II of regulation 7 of the Stock Brokers Regulations. The violation of clause B(8) under Schedule II of regulation 7 of the Stock Brokers Regulations does not stand established in the given facts/circumstance of the case. 5. In view of the above findings, the DA found that Religare had violated clauses A(1), A(2), A(3), A(4), A(5) and B(3) of the code of conduct for stock brokers as prescribed under Schedule II of regulation 7 of the Stock Brokers Regulations. The DA also observed that violation of Clause B(8) under Schedule II of regulation 7 of the Stock Brokers Regulations does not stand established in the given facts/circumstance of the case. Based on the findings as above, the DA recommended suspension of certificate of registration of Religare for a period of one month. The relevant provisions are reproduced as hereunder: Regulation 7: The stock-broker holding a certificate shall at all times abide by the Code of Conduct as specified at Schedule II.

Schedule II 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.

B. DUTY TO THE INVESTOR (3) BREACH OF TRUST: A stock-broker shall not disclose or discuss with any other person or make improper use of the details of personal investments and other information of a confidential nature of the client which he comes to know in his business relationship. (8) COMPETENCE OF STOCK BROKER: A stock-broker should have adequately trained staff and arrangements to render fair, prompt and competent services to his clients.

6. After considering the Report, a show cause notice dated November 17, 2014 (SCN), under regulation 28(1) of the Intermediaries Regulations, was issued to Religare, calling upon it to show cause as to why action as recommended by the DA should not be taken against it or a higher penalty as deemed fit by the Competent Authority should not be imposed upon it. Vide the said SCN Religare was also advised to send its reply, if any, to SEBI within 21 days of the receipt of the SCN. When no reply was received from Religare SEBI, vide letter dated June 9, 2015 issued a reminder to Religare advising it to submit a reply immediately and also indicate whether it would like to avail an opportunity of hearing. Vide its letter dated June 16, 2015, Religare stated that a reply dated December 12, 2014 had already been submitted by it and enclosed a copy of the same. Thereafter, an opportunity of personal hearing was granted to Religare on June 14, 2016 when Mr. Somasekhar Sunderesan, Advocate Mr. Paras Parekh and Mr. Dhaval Kothari, advocates and Mr. Jayant Manglik, Mr. Pradeep Kumar, Mr. Rajesh Sharma and Mr. Kaushal Mehta, the representatives of Religare, appeared and made submissions relying upon the replies of Religare and further emphasised that:- (i) The instant matter pertains to 2008. The cause and effect are no longer proximate. The case has been taken seriously though it has no merit. The Report was submitted in 2014 and two years have been taken for consideration of the Report. This cannot be the approach for dealing with an institutional broker.

(ii) Out of 55 impugned transactions of Ms. Pooja Menghani, only 15 transactions were through Religare. In other words, 71% of Ms. Pooja Menghani’s trades were through entities other than Religare.

(iii) There is no adverse observation in the Report or the SCN alleging that Religare does not train or sensitise its employees about the regulatory requirements.

(iv) Religare is a going concern. Any order for its suspension would be fatal. Recommendation of the DA will have very wide ramification and such recommendation, if accepted, will have the effect of winding up of the entity.

(v) In the given circumstances, after considering the submission of Religare on merits, if Religare is found to have contravened the provisions of the SEBI regulations as alleged in the Report or the SCN, an order for imposition monetary penalty on Religare would be more apt than any suspension order. (vi) In fact, in the main case against Ms. Pooja Menghani and Mr. Deepak Khurana, separate adjudication orders were passed against these entities imposing penalty of `1 Crore and `50 Lac, respectively on them. (vii) The DA had absolved Religare of the charges of violation of Clause B (8) under Schedule II of regulation 7 of the Stock Brokers Regulations. If Religare is absolved of the allegation of violation of clause B(8) under Schedule II, then the other findings against Religare in para 42 of the Report become non-tenable. In these circumstances, no action is warranted against Religare. (viii) If at all it is held in these proceedings that the lapses, as alleged in the Report, should never have occurred, even in that case a regulatory warning would be more appropriate course of action.

In the facts and circumstances of this case, even the issuance of warning to Religare is not sustainable and not required. 7. Religare, vide its undated letter (received on July 01, 2016), filed additional written submission in the matter. The replies/submissions made by Religare, inter alia, are as follows: (i) The fundamental allegation against Religare is that there is failure on its part in adopting due diligence and there was indulgence on its part in front running/ manipulative/ fraudulent activities by Ms. Pooja Menghani. (ii) There is no reason for RSL to indulge in the alleged front-running. Religare has made meagre amount of `43,000/- as brokerage from the trading by Ms. Pooja Menghani. There is no reason for a reputed and substantial entity like Religare to indulge in allegedly incorrect activities for such a meagre amount. (iii) There is nothing in the Report or the Show Cause Notice to allege or demonstrate that the systems implemented by Religare for regulating the trading by its clients was in any manner inadequate or non-compliant with requirements prescribed by SEBI or the exchanges.

Religare is a large organization, with approximately 2000 employees spread over approximately 180 branches along with more than 1100 sub-brokers, authorised person locations. Religare services more than 8 lakh clients in approximately 500 cities. Keeping in mind this scale, Religare has developed robust internal control mechanisms to verify the details of prospective clients, monitor transactions to flag and prevent malpractices. (iv) Religare has suo motu reported details of suspicious transactions by its clients to exchanges. Religare has satisfactory internal controls in place and trading is monitored. (v) Religare's gross turnover across exchanges during 2008-09 was `1,81,984.91 crores in cash segment and `3,69,425.91 crores in derivative segment (including currency derivatives) (vi) The overall turnover of the trades by Ms. Pooja Menghani during 2008-09 was `9.97 crores. Ms. Pooja Menghani 's turnover accounts for only about 0.0018% of the total turnover of Religare. Religare earned a meagre brokerage of `43,000/- from the trades by Ms. Pooja Menghani. The charge of inadequate due diligence could not be levelled against Religare on the basis of such negligible trading.

(vii) Since the relevant period, there have been multiple inspections conducted upon Religare by SEBI and stock exchanges along with half yearly internal audit by external auditors. Such inspections and audits have included in their scope overall review of the trading mechanism and the internal controls of Religare. None of such inspections/ audits have pointed to or alleged any flaw or deficiency in the mechanisms and systems implemented by Religare. (viii) Religare has incorporated, in its functioning, various systems and internal controls to prevent misuse of its trading platform. Religare has, over time, developed and displayed significant competence in ensuring control and reporting of transactions with exchanges and other authorities. (ix) Religare has effective KYC compliance requirements and the integrated surveillance framework which ensure enhanced due diligence while accepting a client. Once a client is on-boarded, Religare also monitors their trading activities both on the exchange as well as off market movements. (x) Even in relation to Ms. Pooja Menghani, Religare had carried out the requisite due diligence by conducting stringent know your client checks and taking requisite details as required under the law.

(xi) In the present case, given the nature of trading by Ms. Pooja Menghani, there was no reason for Religare to believe any wrong doing on her part. Assuming whilst denying that there was front-running in relation to the trades executed by Ms. Pooja Menghani the trading by Ms. Pooja Menghani was effected through 4 stock brokers including Religare. There was no reason for Religare to suspect any wrong-doing on part of Ms. Pooja Menghani since the data at Religare could not have captured details about the same. (xii) There were stock brokers other than Religare that had traded in the scrips at the relevant period for Ms. Pooja Menghani. However, there have been no proceedings initiated against them. The only basis of allegations against Ms. Pooja Menghani is the fact that Mr. Deepak Khurana had placed the orders for Ms. Pooja Menghani as well as the Major Buyers. However, it was not in each and every case that the trades by Ms. Pooja Menghani were in fact around the time that the Major Buyers traded. Even assuming without admitting that there was information to Ms. Pooja Menghani, it is apparent that there was another party apart from Mr. Deepak Khurana who would have informed Ms. Pooja Menghani about the trades by the Major Buyers.

(xiii) The allegations in question pertain to one of the employees of Religare. The Show Cause Notice or the Report do not demonstrate any wrongdoing specifically attributed to Religare in relation to the allegations against Ms. Pooja Menghani. On the other hand, Religare has indeed demonstrated that it has systems in place to curb any illegal trading. (xiv) All the foregoing submissions have been made without prejudice to the core point on merits that Religare did nothing wrong and that nothing in his conduct could lead to a reasonable inference of the need to effect a regulatory intervention. 71% of Ms. Pooja Menghani's Trades (39) instances in the instant case, were undertaken by brokers other than Religare. Ms. Pooja Menghani had traded through three other brokers Narayan, ISF Securities and India Infoline. There are only 16 out of 55 instances (Amtek Auto 8/15, Amtek India 1/11, Ahmednagar Forgings 4/16, Monett Ispat 3/13) where Ms. Pooja Menghani has undertaken allegedly violative trades through Religare. It cannot be, therefore, alleged that majority of the alleged front running trades took place using Religare's platform and it failed in exercising due diligence required from a broker.

An internal review of the trading of Ms. Pooja Menghani was undertaken to check if there were any lapses on the part of Mr. Deepak Khurana. However, no evidence was found against Mr. Deepak Khurana regarding any illegal gain or benefit from the trades. (xv) In 12 out of 55 instances listed in the Show Cause Notice large orders of major buyers were placed with a stock broker names Sunglow and Ms. Pooja Menghani placed her buy/sell orders with other stock brokers, namely Narayan and India Infoline. However, even in these instances a similar pattern (alleged front running) has been noticed in Ms. Pooja Menghani 's trading, which clearly indicates that there ought to have been a third unknown person who had passed on the information regarding the large buy orders to Ms. Pooja Menghani. (xvi) It is evident that in total 15 instances the employee of Religare did not even possess information on large buy orders of major buyers, as the orders were placed by these clients with other brokers. Therefore, the question of its employee passing on such information to Ms. Pooja Menghani does not arise in these cases.

This admitted position ought to lead to a conclusion of there being no violation on part of Religare. 8. I have carefully considered the Report, the SCN issued pursuant thereto, submissions of Religare and other relevant material available on record. Before dealing with merits of the case, I deem it necessary to deal with a preliminary contention of Religare, i.e., there were stock brokers other than Religare that had traded in the scrips during the relevant period for Ms. Pooja Menghani but no proceedings were initiated against them. In my view, the fact that SEBI has not initiated any action against other stock brokers cannot be a reason for absolving Religare from the alleged violations. In this regard, I also rely upon of the Hon’ble SAT in the matter of Shraddha Stock Broking Private Limited vs SEBI (order dated December

03, 2012 - Appeal No. 162 of 2012), whereby it has held as under: “........................the guarantee of equality before law under Article 14 of the Constitution is a positive concept and it cannot be enforced in a negative manner. This view gets support from the principles laid down by the Apex Court in the case of State of Bihar vs. Upendra Narayan Singh and Ors.[(2009)5SCC65], relied upon by learned senior counsel for the Board. If the appellant has been found to be guilty of violating the regulatory framework, it cannot claim exoneration on the ground that no action has been initiated by the Board against another person who has been found guilty for violating the Regulations. We may hasten to add that the regulator is supposed to adopt a uniform policy for initiating action against persons who violated the regulatory framework but any such deviation cannot give a right to the appellant to claim immunity from action for the violation committed by it.” 9. In view of the above, I am not inclined to accept the contention of Religare in this regard. 10. I note that DA has dropped the charge of non-compliance of clause B(8) under Schedule II of the Stock Brokers Regulations against Religare.

I note that clause B(8) mandates that a stock-broker should have adequately trained staff and arrangements to render fair, prompt and competent services to his clients. The charge against Religare as per Report is that ‘…there was failure on the part of the Noticee in adopting due diligence and also there was indulgence on its part in front running / manipulative/fraudulent activities…’ Hence, the contention of Religare that dropping the charge of non-compliance of clause B (8) would make the other allegations non-tenable, in my opinion, is unfounded. 11. Coming to the merits of the case, it is noted that the transactions described in the SCN have not been disputed by Religare. The charge against it is that it violated the aforementioned provisions of the Stock Brokers Regulations. I note that for arriving at his findings in the Report the DA has framed the following issue for consideration in para. 7 of the Report- “The issue which arises for consideration is whether the Noticee (through Deepak who placed orders) had failed to exercise due care, diligence and promptitude while dealing for its aforesaid clients and thereby violated aforesaid provisions of Stock Brokers Regulations?” 12. In this regard, in his Report, at para. 42, the DA has observed as under: “Since, Deepak who was one of the branch heads of the Noticee, had placed such orders from the platform of the Noticee, hence, needless to say that being a registered stock broker, the Noticee should have exercised adequate care/caution and should have suitably advised/cautioned its employees about the practices to be followed in its business.

Under law, duty is casted upon the registered stock broker to adequately instruct its employees to render fair services to its clients and not to indulge in any kind of manipulative/fraudulent activities during the course of its business. As observed above, such kinds of trading was assisted by the Noticee to Pooja for a long time viz. from July to December 2008. Apparently, there was failure on the part of the Noticee in adopting due diligence and also there was indulgence on its part in front running / manipulative/fraudulent activities as observed in pre-paras. Undoubtedly, passing of such information / front running assisted her in placing buy orders for shares at lower price and subsequently selling them at higher price which resulted into huge profit of around `28.9 lakh to her through the Noticee. Therefore, the allegations as levelled under the SCN against the Noticee, stands established.” 13. I note from the above that while the charge against Religare, was its alleged failure to exercise due care, diligence and promptitude while dealing for its client Ms. Pooja Menghani, the DA gave finding that there was failure on the part of Religare in adopting due diligence and also there was indulgence on its part in front running/manipulative/fraudulent activities.

This charge is based on facts and circumstances examined in the Report. 14. I note that Ms. Pooja Menghani had traded in the scrip of Amtek Auto for 15 days. On 14 days her position was squared off. Out of the 15 instances, only in 3 instances Religare was not the stock broker at either side (i.e., buy/sell). That means in 12 instances, Religare was acting as the stock broker for Ms. Pooja Menghani or Major Buyers. Ms. Pooja Menghani traded in the scrip of Amtek India for 10 days, wherein she had traded through Religare only on one day. However, Religare was the stock broker for MSR Marketing for 9 out of 10 days. Ms. Pooja Menghani traded in Ahmednagar Forgings for 16 days. On 8 days Religare was the stock broker for one side of the trade. Ms. Pooja Menghani traded in Monnet Ispat for 8 days. In all the 8 days Religare was the stock broker on any one side of the trade. The fact of placing orders consistently by Ms. Pooja Menghani ahead of the large buy orders of Major Buyers and that her trades were limited to a few days in the four scrips, indicate that her trading ahead of the large buy orders cannot always be a coincidence, but were done with a prior knowledge regarding the imminent large buy orders of Major Buyers.

It is an established fact that Mr. Deepak Khurana had introduced Ms. Pooja Menghani to Religare and was placing orders for both Ms. Pooja Menghani as well as the Major Buyers on several occasions. Certainly, such orders were placed by Ms. Pooja Menghani upon receiving information from Mr. Deepak Khurana, who was a branch manager of one of the offices of Religare, about imminent orders of the Major Buyers as alleged. 15. It has also been brought to my notice that pursuant to the investigation in the matter, adjudication proceedings were initiated against Ms. Pooja Menghani and Mr. Deepak Khurana. Vide order dated April 29, 2012 the Adjudicating Officer had imposed a penalty of `50 Lac on Mr. Deepak Khurana. The said order was challenged before the Hon’ble Securities Appellate Tribunal (the Hon’ble SAT). Vide order dated February 17, 2016, the Hon’ble SAT allowed Mr. Deepak Khurana to withdraw the said appeal. Similarly, vide order dated April 30, 2012 a penalty of `1 Crore was imposed on Ms. Pooja Menghani for the contravention of provisions of regulations 3(a) and 4(1) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade and Practices relating to Securities Market) Regulations, 2003 (the PFUTP Regulations, 2003).

The said order of the Adjudicating Officer was impugned before the Hon’ble SAT. The Hon'ble SAT vide majority order dated April 23, 2014 upheld the order of SEBI. Since then, prosecution has been initiated against Ms. Pooja Menghani for non-payment of the penalty. In my view, therefore, the facts of the case pertaining to the allegations qua Ms. Pooja Menghani and Mr. Deepak Khurana have attained finality. 16. I find that in the instant case, the charge on the Religare is with regard to the observance of code of conduct and not of violation of the provisions of 3(a) and 4(1) of the PFUTP Regulations, 2003 as was the case for Ms. Pooja Menghani and Mr. Deepak Khurana. 17. In its defence, Religare has contended that Ms. Pooja Menghani was maintaining running account of funds and securities with Religare and her trading was allowed based on standard risk and margin procedures. However, in support of such contention, no documentary proof has been filed in the proceeding. I also note that Ms. Pooja Menghani was not shown to be a High Networth Individual or/ Institutional Investor wherein some stock broker would discuss over phone about market behaviour, especially when Religare was having thousands of other clients in the same branch.

Therefore, the contention of Religare that it is a normal practice for the dealers to interact with clients to discuss market behavior does not merit any consideration. 18. I note that the SCN and the Report contain observation regarding the role of Mr. Deepak Khurana in the trades by Ms. Pooja Menghani. The fact that Ms. Pooja Menghani had indulged in front running with the active support of Mr. Deepak Khurana has already been discussed above. In the instant case, Mr. Deepak Khurana was a branch head of Religare and had placed orders on behalf of Ms. Pooja Menghani and Major Buyers using its platform. Thus, it is an undeniable fact that its trading platform was misused by its branch manager Mr. Deepak Khurana for the front running by Ms. Pooja Menghani and the same could not detected by Religare despite its claims of having adequate internal controls. Further, Religare has not produced anything to suggest that it had adequately instructed its employees to render fair services to its clients and not to indulge in any kind of manipulative/fraudulent activities. I, therefore, find that Religare has failed in its duty to exercise adequate care/caution and suitably advise/caution its employees about the practices to be followed in its business or adequately instruct its employees to render fair services to its clients and not to indulge in any kind of manipulative/fraudulent activities.

19. On careful examination of the Report it is noted that while DA has dropped the allegation of non–compliance of clause B(8) as aforesaid, the Report is silent as to how Religare has failed to abide by clause B(3) of the Code of Conduct under Schedule II of the Stock Brokers Regulations which casts a duty on the stock broker that it does not disclose or discuss with any other person or make improper misuse of the details of personal investment and other information of confidential nature of the client which he comes to know in his business relationship. It also does not clearly brings out as to how Religare has failed to comply with Code of Conduct specified in clause A(3) and A(4) of Schedule II. I also take note of the fact that the charge against Religare as established in this case is only non-compliance of code of conduct requirements about observance of due diligence, maintaining high standards of integrity, etc. 20. I further note that Religare is an institutional stock broker and the matter pertains to the year 2008. Further, out of 55 impugned transactions of Ms. Pooja Menghani, only 15 transactions were through Religare for which it had earned a meagre amount of `43,000/- as brokerage.

In view of the facts and circumstances discussed in the Report, in my view, it is least likely that an institutional broker would indulge in fraudulent and manipulative activities like front running /manipulative/fraudulent trading activities and jeopardise its business for such a meagre amount. 21. Religare has claimed to have effective KYC compliance requirements and the integrated surveillance framework which ensures enhanced due diligence while accepting a client and it has incorporated, in its functioning, various systems and internal controls to prevent misuse of its trading platform. Further, there have been multiple inspections conducted upon Religare by SEBI and stock exchanges along with half yearly internal audit by external auditors. Such inspections and audits have included in their scope overall review of the trading mechanism and the internal controls of Religare. It has further submitted that none of such inspections/audits have pointed to or alleged any flaw or deficiency in the mechanisms and systems implemented by Religare. 22. Considering the facts and circumstances of the case and mitigating factors as aforesaid I am of the view that a warning to Religare Securities Limited would be reasonable and commensurate with the lapses in the instant case.

23. I, therefore, in exercise of the power conferred upon me by virtue of section 19 of the Securities and Exchange Board of India Act, 1992, read with regulations 28(2) and 38(2) of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, hereby advise Religare Securities Limited to be careful and cautious in the conduct of its stock broking activity and to adhere to and comply with all the statutory provisions while carrying out its activities in the securities market.

Sd/-

DATE: SEPTEMBER 20TH, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA