Order of Cancellation of Registration Certificate of 7 earstwhile NSE Members
- Order No.WTM/SR/MIRSD/85/04/2015
Ratio decidendi
The rule this decision rests on
A stock broker's certificate of registration is conditional on its holding membership of a stock exchange and abiding by that exchange's rules. Where the broker has ceased to be a trading member of the exchange and has not been readmitted, the condition on which registration was granted no longer subsists, and there is no reason in law to continue the registration. Payment of the registration fees chargeable under the Brokers Regulations is likewise a condition of registration (rule 4(d) read with regulation 6A(1)(d)). The Board's authority to levy such fees is established, and a stock broker's outstanding fee liability is a ground on which its registration may be cancelled. Proceedings commenced under the repealed Enquiry Regulations may be continued after the repeal under regulation 33B(5) of the Intermediaries Regulations, so that the enquiry officers' report and the material on record may be considered in the new regime. The Whole Time Member may cancel a registration under section 12(3) read with section 19 of the SEBI Act and regulations 27 and 33B of the Intermediaries Regulations where the conditions of registration have ceased to be met.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
ORDER Under regulation 33A and 33B of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 in respect of Investment Point (India) Limited (INB230793536), Mascot Securities Limited (INB230770735), Montage Securities Limited (INB230648434), R. C. Garg & Sons Capital Services Limited (INB230877630), Sushant Capital Limited (INB230599433), Westfin Securities Limited (INB230781039) and Ken Financial Services Limited (INB230752537)
1. Investment Point (India) Limited (INB230793536), Mascot Securities Limited (INB230770735), Montage Securities Limited (INB230648434), R. C. Garg & Sons Capital Services Limited (INB230877630), Sushant Capital Limited (INB230599433), Westfin Securities Limited (INB230781039) and Ken Financial Services Limited (INB230752537) {hereinafter referred to as "Noticees") are stock brokers registered with Securities and Exchange Board of India (hereinafter referred to as "SEBI"). The registration certificate granted to a Stock Broker is subject to compliance of the SEBI Act, 1992, SEBI (Stock Brokers and Sub-Brokers) Rules, 1992 (since repealed) and the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 ("Broker Regulations").
2. The Noticees were trading members of the National Stock Exchange of India Limited ('NSE'). Vide letters dated December 01, 2003 and January 04, 2005 NSE informed SEBI that the Noticees were expelled or declared as defaulter in accordance with its rules and bye-laws. The details are tabulated as under: Sl No Stock Broker Registration Status With effect from No. 1. Investment Point (India) Ltd. INB230793536 Expelled May 16, 2000 2. Mascot Securities Ltd. INB230770735 Expelled April 08, 1999 3. September 08, Montage Securities Ltd. INB230648434 Defaulter 1997 4. R. C. Garg & Sons Capital Services Ltd. INB230877630 Defaulter July 01, 1997 5. Sushant Capital Ltd. INB230599433 Expelled May 16, 2000 6. Westfin Securities Ltd. INB230781039 Defaulter July 01, 1997 7. November 24, Ken Financial Services Ltd INB230752537 Expelled 2004
3. It is also observed that the Noticees failed to pay the registration fees to SEBI as per the provisions of Brokers Regulations read with Rule 4 of the SEBI (Stock Brokers and Sub Brokers) Rules, 1992. In view of this, SEBI initiated summary proceedings against the Noticees in the year 2004-05 in terms of the provisions of Chapter III of the SEBI (Procedure for Holding Enquiry by enquiry Officer and Imposing Penalty) Regulations, 2002 ("Enquiry Regulations") as the Noticees were expelled or declared defaulter by NSE and/or failed to pay registration fees to SEBI.
4. The Enquiry Officers, on completion of the proceedings prescribed for conducting Summary Proceedings under the Enquiry Regulations, recommended cancellation of certificate of registration granted to the Noticees under rule 4(a) of Stock Brokers Rules read with regulation 25 and 15(c) of the Brokers\ Regulations.
5. Subsequently the Enquiry Regulations were repealed and SEBI (Intermediaries) Regulations, 2008 (hereinafter referred to as "Intermediaries Regulations") were notified with effect from on May 26, 2008. Hence, the proceedings were continued as per regulation 33B(5) of the Intermediaries Regulations. I have perused the Enquiry Report submitted by the Enquiry Officers and the other material available on record such as fee liability statement in respect of the Noticees and correspondence between SEBI and NSE etc,.
6. It is noted that as per rule 4 (a) and (b) of the SEBI (Stock Brokers and Sub-Brokers) Rules, 1992 read with regulation 6A (1)(a) and (b) of the Brokers Regulations, the certificate of registration granted to a stock broker is subject to inter alia the condition, namely:- (a)he holds membership of any stock exchange; (b)he shall abide by the rules, regulations, bye-laws of the stock exchange of which he is a member. (c).... (d)he shall pay fees charged by the Board in the manner provided in these regulations; and ....
7. It is noted that in terms of Bye Law 1 (in Chapter XII-Declaration of Default) of the NSE Bye Laws, NSE may declare a trading member a defaulter (by direction/ circular/ notification) if the conditions stipulated therein are satisfied. Further, Rule 28 of Chapter III (Trading membership) of the NSE Rules, provides that any trading member may cease to be a member by being declared a defaulter or expelled in accordance with the Bye Laws, Rules and Regulations of the Exchange. It is also noted from NSE's letter dated January 18, 2010 that the Noticees ceased to be its trading members.
8. As the Noticees ceased to be trading members of NSE and have not been re-admitted as its members, the conditions on which SEBI granted registration no longer exists. Hence, at this juncture, there is no logical reason to continue the registration qua the Noticees.
9. As regards the failure to pay the registration fees by the Noticees, it is noted that except Noticee No. 4 viz., R. C. Garg & Sons Capital Services Limited other Noticees do not have outstanding fee liability.
10. As per Regulation 10(1) of the Broker Regulations, every stock broker is required to pay fees as specified in Schedule III. In accordance with the provisions of Schedule III to the Brokers Regulations, a stock broker is required to pay the fees on or before 1st October for the preceding financial year as prescribed. The Hon’ble Supreme Court of India, vide Order dated February 01, 2001 in the matter of BSE Brokers Forum vs. SEBI ([2001] 30 SCL 31) upheld the authority of SEBI to levy registration fees from stock brokers.
11. It is noted from the fee liability statement in respect of Noticee No. 4 viz., R. C. Garg & ` Sons Capital Services Limited that as on March 2015, an amount of 16,80,424/- is due towards registration fees from the Noticee. The details of fee due in respect of Noticee No. 4 is tabulated as under: Sl Stock Broker Registration Fee Fee Interest Total fees No No. payable paid payable payable (principal) as on In (`) date 1 R. C. Garg & Sons Capital Services Ltd. INB230877630 4,87,763 489 11,92,661 16,80,424
12. In view of the foregoing, I, in exercise of the powers conferred upon me under Section 12(3) read with Section 19 of the SEBI Act and regulations 27 and 33B of the SEBI (Intermediaries) Regulations, 2008, hereby cancel the certificate of registration of Investment Point (India) Limited (INB230793536), Mascot Securities Limited (INB230770735), Montage Securities Limited (INB230648434), R. C. Garg & Sons Capital Services Limited (INB230877630), Sushant Capital Limited (INB230599433), Westfin Securities Limited (INB230781039) and Ken Financial Services Limited (INB230752537).
13. This Order shall come into force with immediate effect.
14. A copy of this Order shall also be served on the National Stock Exchange of India Limited.
Date: April 24, 2015 S RAMAN Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA
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