Order passed by SEBI in respect of SIC Stocks and Services Private Ltd.

Order in the matter of Enquiry Proceedings against SIC Stocks and Services Pvt. Ltd.

WTM/ AB / EFD-I/DRA- I/ 47 /2019-20 SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: ANANTA BARUA, WHOLE TIME MEMBER ORDER Under Section 12(3) of Securities and Exchange Board of India Act, 1992 read with Regulations 28 of Securities and Exchange Board of India (Intermediaries) Regulations, 2008 In the matter of SEL Manufacturing Company Ltd. In respect of: Sr. No. Name of the Intermediary Registration Number 1 SIC Stocks and Services Private Ltd. INB011180339/INB2 31180333 Stock Broker- NSE & BSE

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) initiated enquiry proceedings under the provisions of SEBI (Intermediaries) Regulations, 2008 (hereinafter referred to as "Intermediaries Regulations") against M/s SIC Stocks and Services Private Ltd. (hereinafter referred to as “Noticee” or “SIC” or “stockbroker”) based on an investigation into the IPO of SEL Manufacturing Company Limited (hereinafter referred to as “SEL/Company”) and the trading in the scrip of SEL for the period August 21, 2007 to August 27, 2007 (hereinafter referred to as ‘Investigation period’). A show cause notice dated October 15, 2012 (hereinafter referred to as “First SCN”) was issued by the Designated Authority (hereinafter referred to as “DA”) to the Noticee. As per the Enquiry Report dated

August 21, 2018 (hereinafter referred to as “ER”), the following allegations were made against the Noticee in the First SCN: a. As per the details available on record, Meera traded through you and bought 12,03,139 shares at BSE and sold 12,02,129 shares at BSE between August 21, 2007 to August 27, 2007. It is observed from her Bank Account Statement that on many occasions she received funds from Hanuman Enterprises and transferred to the Stock Broker. Similarly, the sale proceeds of shares was also transferred to the same Hanuman Enterprises. b. On being summoned, Meera appeared before the Investigating Authority on July 29, 2011 and stated that she had no knowledge about the trading and transactions in her bank account. She alleged that you had misused her account. Pursuant to the summons issued to SIC, Shri. Sidhartha Handa, CEO appeared on behalf of SIC before the Investigating Authority on August 04, 2011 and furnished copy of account opening form (KYC) of Meera, copy of pool account highlighting the delivery of shares to/from Meera, copy of her bank account statement showing payment made/received to/from her and also details of orders placed by her.

It is observed from the documents furnished by you that Meera, a housewife, is Higher Secondary passed and does not have any prior experience in trading and her income is below 1,00,000. c. It is also observed that you had bought 5,08,171 shares and sold 4,36,981 shares in the name of Meera on August 21, 2007 and you were required to deliver the balance 71,736 shares to her. However, you kept the balance of shares in the pool account till August 27, 2007 to meet her pay in obligation for her trading on August 27, 2007. You had failed to deliver the balance shares to the account of Meera. Further, it also observed from the ledger of Meera furnished by you to the Investigating Authority that you had received an amount of Rs. 17,98,200 in cash on August 03, 2007. d. With respect to the order placement by Meera, you had stated that she was using online trading facility as well as she placed order at your dealing office. You were asked by the Investigating Authority to produce acknowledged copy of the letter issuing her the user ID and password for using online trading, which you had failed to furnish.

Further, you had also failed to furnish the trade log file showing the IP address to trace the identity / location of the person who placed the orders on her behalf before the Investigating Authority. e. In view of the above facts it is alleged that you have violated Regulation 17 read with Regulation 18 of SEBI (Stock Brokers & Sub- Brokers) Regulations, 1992. Further, it is also alleged that your actions have also led to the violation of following circulars: (i) SEBI Circular No. MRD/DoP/SE/Dep/Cir-30/2004 dated August 24, 2004 (ii) SEBI Circular No. SEBI/MRD/SE/Cir-33/2003/27/08 dated August 27, 2003 (iii) SEBI Circular No. SMDRP/POLICY/CIR-06/2000 dated January 31, 2000 (iv) SEBI Circular No. SMDRP/Policy/Cir-48/2000 dated October 11, 2000 (v) SEBI Circular No. MRD/DoP/Cir-20/2005 dated September 08, 2005 f. Further, it is observed from the Investigation Report that you had failed to provide the acknowledged copy of the contract notes issued to Meera before the Investigating Authority. Further, the copy of the letter for closing the account of Meera forwarded by you to the Investigating Authority appears to be overwritten and the reason for closing the account was not mentioned.

From the said letter it appears that it is a general format for closing the account and you had taken the signature earlier probably at the time of opening of account. g. In view of the above actions, it is alleged that you have violated Regulations 3(a), 3(b), 3(c), 3 (d) and 4(1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003, Clause A(l), (2), (3),(4) and (5) and Clause B(2) of the Code of Conduct of Schedule II prescribed under Regulation 7 of the SEBI (Stock Brokers & Sub Brokers) Regulations, 1992.

2. The DA, after considering the facts of the case and the replies of the Noticee dated November 03, 2012 and July 07, 2016, submitted the ER which observed the following defaults on the part of the Noticee: A. The Noticee had failed to preserve data/records which it was statutorily required to maintain for a prescribed time period and failed to produce the records before the Investigating Authority hereinafter referred to as “IA”) and thus had violated the provisions of Regulation 17 read with Regulation 18 of the SEBI (Stock Brokers & Sub- Brokers) Regulations, 1992 (hereinafter referred to as ‘Stock Broker Regulations’) and also the provisions of Circulars SMDRP/POLICY/CIR-06/2000 dated January 31, 2000, SMDRP/Policy/Cir- 48/2000 dated October 11, 2000 and MRD/DoP/SE/Cir-20/2005 dated September 08, 2005. B. The Noticee had misused the trading account of Ms. Meera and had traded in significant quantities in the scrip of SEL during the investigation period and therefore had violated Clause B(2) of the Code of Conduct for stock brokers as mentioned in Schedule II read with Regulation 7 of Stock Brokers Regulations. Further, in view of the findings that Noticee had misused the trading account of Ms. Meera to transact in the scrip of SEL, the Noticee had violated the provisions of Regulations 3 (a), (b), (c), (d) and 4 (1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (hereinafter referred to as ‘PFUTP Regulations’). The Noticee had also failed to act as a prudent and responsible stock broker and had violated the provisions of Clauses A(1), A(2), A(3), A(4) and A(5) of Code of Conduct for stock brokers as mentioned in Schedule II read with Regulation 7 of Stock Brokers Regulations. C. The Noticee had failed to deliver the securities to the demat account of Meera within 24 hours of receiving the securities in its pool account and thus violated SEBI vide Circular MRD/DoP/SE/Dep/Cir-30/2004 dated August 24, 2004. D. By accepting cash from Ms. Meera, the Noticee had violated the provisions of SEBI Circular no. SEBI/MRD/SE/Cir-33/2003/27/08 dated August 27, 2003.

3. In view of the above-mentioned defaults the DA recommended the following action against the Notice: “RECOMMENDATION 38. While making the recommendations, I cannot lose sight of the seriousness of the observations made against the Noticee in this report. It is clear from the material available on record that there is enough evidence to establish that Noticee was actively involved in misusing the trading account of its client viz, Meera thereby carrying out fraudulent activities in the securities market. The same is also evident from the manner in which the Noticee has deliberately not provided various documents and materials which it was statutorily required to preserve and produce before SEBI and which were instrumental in establishing the modus operandi of the Noticee w.r.t. dealing in the account of its client without authorization. 39. In view of the above observations and the gravity of the violations committed by M/s SIC Stocks and Services Private Ltd., as a registered stock broker of NSE and BSE, it is established that the Noticee has conducted in an unprofessional manner in its functioning as a stock broker.

Therefore, in terms of Regulation 27 of the Intermediaries Regulations, I hereby recommend that M/s SIC Stocks and Services Private Ltd, as a stock broker of BSE and NSE in the cash segment (under certificate of Registration numbers INB011180339 and INB231180333) may be prohibited from registering fresh/new clients for a period of 3 months.” 4. Pursuant to enquiry, a show cause notice dated October 09, 2018 (hereinafter referred to as “Second SCN”) was issued to the Noticee forwarding therewith a copy of the ER and calling it to show cause as to why action as recommended by the DA in the ER, including passing of appropriate directions should not be taken against it in terms of Regulations 28(2) of the SEBI (Intermediaries) Regulations, 2018. Vide letter dated November 08, 2018 the Noticee sought time of one month to file a reply to the second SCN. Since no reply was received from the Noticee, an opportunity of hearing was granted to it on April 12, 2019. Vide email dated April 05, the Noticee sought an adjournment of hearing and another opportunity was provided to it on May 07, 2019 which was rescheduled to May 13, 2019 due to work exigencies.

Due to non-availability of its counsel the Noticee sought a further adjournment of the hearing scheduled on May 13, 2019. A final opportunity of hearing was granted before me on June 18, 2019. The Authorized Representatives (hereinafter referred to as “AR”) made submissions before me on the said date. 5. After the hearing, the Noticee filed a reply dated July 08, 2019 wherein the Noticee submitted the following:

i) The aforesaid allegation is levelled upon the Noticee on the premise that it had misused the trading account of Ms. Meera and her statement recorded during the course of investigation, has been relied upon. However, no cross examination of Ms. Meera has been permitted. ii) The Noticee does not advise its clients in connection with the sale or purchase of securities by them. The Noticee merely executes the orders received as per the instructions of the clients without questioning the prudence of the transactions. The trades in question are carried out by Ms. Meera during the Investigation Period. Ms. Meera was trading through the Noticee from May 2007 and since long i.e. for last around ten years, the Noticee had stopped executing her trades. iii) The Noticee has been wrongly roped in and alleged to have violated PFUTP Regulations and Section 12 A (a) to (c) of SEBI Act and an element of mens rea has to be established whenever fraud is alleged but no such mens rea has been established with respect to the Noticee. No allegation of connivance or scheme or plan has been alleged in the SCN. The Noticee has not dealt in the scrip of SEL ever. iv) The DA has failed to appreciate the inconsistencies and the contrary facts brought out by the statement of Ms Meera and has relied upon her statement, filled with complete lies and allegations without any documentary evidence, in holding the Noticee guilty of serious violation of PFUTP Regulations and code of conduct.

v) Ms. Meera was introduced to the Noticee by her brother Mr. Chetan G Wadhwa, who was an approved Remisier of BSE. The KYC of Ms Meera reveals that she was introduced by her brother. On perusal of whatever records are available with the Noticee, it appears that Ms. Meera’s brother Mr. Chetan was coming to the Noticee’s office regularly and was in touch with dealer for placing the orders for his sister and other clients. vi) The bank account of the client cannot be operated by the broker since the bank would not allow the same and the Noticee also deny that it had operated her bank account at any time. Therefore, the Noticee cannot comment on her transactions with Hanuman Enterprises. vii) Prior to the investigation, Ms. Meera did not raise any grievance with respect to the alleged trades. Therefore, her statement is only an afterthought. viii) The shares that were bought by SIC on behalf of Ms. Meera on August 21, 2007 were received by SIC on August 23, 2007. August 25, 2007 and August 26, 2007 were the weekend and August 27, 2007 was a Monday. By the time the Noticee was about to execute this transaction on August 24, 2007, as per stipulation of "within one working day after payout day" Ms. Meera informed SIC about her intention to sell the securities on Monday i.e. August 27, 2007. Therefore as she had already earmarked the said securities for sale, unnecessary movement of securities would have resulted in cost to the client, therefore the securities were not transferred to client's beneficiary account and kept in pool account with her consent. This is an admitted fact that the securities were sold on August 27, 2007 and she has already given the Noticee running account authorisation. Whatever shares were bought by her were sold and her net position was zero. ix) With respect to the acceptance of cash by the Noticee, it was the rarest of the rare case and Ms. Meera’s brother Mr. Chetan had deposited cash in the Notice’s account and it is not the case that the noitcee had made the payment in cash. At relevant time, there was no restriction for accepting money as seller of goods.

Consideration of Issues

6. Before dealing with various issues involved in the matter, it would be appropriate to refer to the brief background of the matter because of which the present enquiry proceedings came to be initiated against the Noticee. In this regard, the ER states that, upon receipt of a complaint dated August 20, 2010 alleging, inter-alia, that the promoters of SEL had cheated the shareholders during the process of Initial Public Offering (hereinafter referred to as “IPO”) of SEL, SEBI conducted an investigation into the IPO of SEL and the trading in the scrip of SEL for the period August 21, 2007 to August 27, 2007. 7. During the course of investigation, it was observed that one Ms. Meera a client of the Noticee, was involved in heavy trading in the scrip of SEL on intraday basis during the investigation period. On being summoned, Meera appeared before the Investigating Authority on July 29, 2011 and stated that she had no knowledge about the trading and transactions which were done in her bank accounts viz. bank account number 4408 maintained with Punjab & Sind Bank and bank account number 02521200000028 maintained with Development Credit Bank. She also submitted that the trading in the scrip of SEL in her account was done by the Noticee. Pursuant to the same, summons were issued to the Noticee and Shri. Sidhartha Handa, CEO of the Noticee appeared on its behalf before the IA on August 04, 2011 and furnished copy of account opening form (KYC) of Ms. Meera, copy of pool account highlighting the delivery of shares to/from Ms. Meera, copy of her bank account statement showing payment made/received to/from her and also details of orders placed by her. He also stated that Ms. Meera was using online trading facility as well as she placed order at the Noticee’s dealing office. The Noticee was asked by the Investigating Authority to produce acknowledged copy of the letter issuing her the user ID and password for using online trading, which it had failed to furnish. Further, the Noitcee had also failed to furnish the trade log file showing the IP address to trace the identity / location of the person who placed the orders on her behalf before the Investigating Authority as well as the acknowledged copy of the contract notes.

8. I have considered the ER and the replies submitted by the Noticee before me. My observations regarding the allegations made against the Noticee in the second SCN are as follows:

Failure to preserve records

9. In the ER it has been observed that the Noticee was specifically advised by the IA to submit/produce certain records viz. the acknowledged copy of letter issued by the Noticee to Ms. Meera issuing user ID and password for using the online trading facility as well as the log file showing the IP address in order to trace the identity/location of the person who placed the orders in the trading account of Meera and the proof of delivery of the contract notes issued to Ms. Meera. The ER states that the Noticee failed to produce these records and submitted that the records/ documents sought by the IA were not easily available as the Noticee’s office was shifted on two occasions during the said time period. I note that the IA had sought the letter related to online trading and the log file since the CEO of the Noticee had submitted that Ms. Meera had executed her trades using the online facility. However, vide its reply dated July 08, 2019 before me the Noticee has now submitted that the brother of Ms. Meera ( Mr. Chetan Wadhwa, who was a remisier of BSE) was placing orders from the Noticee’s office and that Ms. Meera was not carrying out online trades. I observe that the Noticee’s submissions are not the same before the DA and me. I note that the acknowledged copy of the contract notes have not been produced by the Noticee, nor has the Noticee submitted any document in support of its submission with respect to Ms. Meera’s trades being placed by her brother. I note that the impugned trades took place in 2007 and the IA had first sought the records from the Noticee in 2011, i.e. around 4 years after the date of the aforementioned transactions. In this regard, Regulation 17 read with Regulation 18 of Stock Broker Regulations requires every stock broker to preserve data mentioned therein, including contract book and copies and counterfoil of contract notes for a minimum period of 5 years. SEBI Circular Nos. SMDRP/POLICY/CIR-06/2000 dated January

31, 2000, SMDRP/Policy/Cir-48/2000 dated October 11, 2000 and MRD/DoP/SE/Cir-20/2005 dated September 08, 2005 also requires stock brokers to maintain documents mentioned therein for a minimum period of 5 years. In view of the failure of the Noticee to produce the documents sought by the IA, I find that the Noticee has not complied with the provisions of Regulation 17 read with Regulation 18 of the Stock Broker Regulations and also the provisions of Circulars SMDRP/POLICY/CIR-06/2000 dated January 31, 2000, SMDRP/Policy/Cir-48/2000 dated October 11, 2000 and MRD/DoP/SE/Cir-20/2005 dated September 08, 2005.

Misuse of client’s trading account

10. The ER, has inter alia observed that there was heavy trading in the scrip of SEL during the investigation period in the account of Ms.Meera and trading in the scrip was on intraday basis. The details of the trading in in the scrip of SEL by Ms. Meera during the investigation period is as under:

Percentage Percentage Net Buy of total Sell of total Date Rate Rate Deliverable Quantity market buy quantity market sell Quantity volume volume August 21, 2007 508717 105.76 1.89 436981 127.20 1.62 71736 August 22, 2007 71000 164.99 1.27 71000 171.30 1.27 0 August 23, 2007 314636 168.10 2.83 299636 176.73 2.69 15000 August 24, 2007 82385 194.65 0.80 82385 218.99 0.80 0 August 27, 2007 226401 226.55 1.69 312127 217.94 2.33 -85726 11. As can be noted from the above table, Ms. Meera bought a total of 12,03,139 shares and sold a total of 12,02,129 shares of SEL in 5 trading days. For all these trades executed by Ms. Meera, the Noticee was her stock broker. Regarding the aforesaid trades by Ms. Meera, the ER states as follows:

“11. During the course of investigation, the Noticee was summoned to appear before the IA along with certain documents/records viz. Meera’s KYC documents, copy of the pool account statement and the bank account statements and also all the supporting records/documents evidencing the details of the order placement by Meera in the scrip of SEL during the investigation period. I note that Shri Sidhartha Handa, CEO of SIC had appeared before the IA on August 4, 2011 and had furnished certain details/information. With respect to the order placement in the scrip of SEL by Meera, Shri Handa mentioned that Meera was using the online trading facility that was offered to her by the Noticee, though in some cases, she had placed orders directly at their dealing office. In light of this and in view of the specific allegation made by Meera that Noticee had misused her trading account, Noticee was advised to submit the acknowledged copy of the letter issued by it to Meera whereby, the client was provided with the user ID and password by the Noticee to use the online trading facility offered by the Noticee. Further, Noticee was also advised to submit the details/records of the log file showing the IP address w.r.t the transactions in the scrip of SEL placed in the trading account of Meera during the investigation period. The above details/information were sought from the Noticee by the IA in order to clearly establish/track the identity/location of the person who had placed the orders in Meera’s trading account. In addition to the above, the Noticee was also advised to submit the proof of delivery of the contract notes issued by it to Meera w.r.t her transactions in the scrip of SEL during the investigation period. However, it is on record that despite repeated opportunities that were provided to the Noticee, it failed to submit the aforementioned specific records/documents sought by the IA. All that was submitted by the Noticee during the course of the proceedings were (a) copy of the ITORS agreement executed by the Noticee with its client vis. Meera and (b) a sample copy of contract note dated December 7, 2012, which the Noticee had issued to Meera w.r.t her transactions in the scrip of another company viz. Mudra.

12. In view of the seriousness behind the allegations that were made against the Noticee by Meera that Noticee had misused her trading account w.r.t her transactions in SEL, the IA of SEBI had specifically sought from the Noticee the details of the user ID, Password and also the order log details in order to confirm the IP address of the order placement in the scrip of SEL. I note that instead of submitting the specific details/records sought by the IA, Noticee had submitted a copy of ITORS agreement, which did not contain the specific details /information sought by the IA. The aforementioned details/information sought from the Noticee by the IA was very relevant and vital in unearthing the truth behind the allegations levelled against the Noticee by Meera. I do not find any reason for the Noticee to hide this information unless some deceitful practices were being carried out by it in the client/trading account of Meera. Further, I also note that instead of submitting the copies of the acknowledged contract notes issued to its client w.r.t the transactions in SEL during the investigation period, Noticee has merely submitted a copy of a sample contract note which was issued to Meera in another scrip i.e. Mudra. The contention of the Noticee that it had shifted its office on two occasions and therefore, the records could not be produced does not aid the defense of the Noticee. If the trades in the scrip of SEL were actually executed /placed by Meera, then nothing stopped the Noticee to submit the above sought documents/information. In view of its failure to submit the records/details, as mentioned above, one cannot but take an adverse view of the same and I conclude that Noticee had actually misused the trading account of Meera w.r.t her transactions in the scrip of SEL during the investigation period.” 12. The DA has concluded that the Noticee has misused the trading account of Ms. Meera with fraudulent/manipulative intent, based on the following observations in the ER:

a) Before the IA, the CEO of the Noticee had mentioned that Ms.Meera was using the online trading facility that was offered to her by the Noticee but the Noticee had failed to submit the acknowledged copy of the letter issued by it to Meera whereby, the client was provided with the user ID and password by the Noticee to use the online trading facility offered by the Noticee. Further, the Noticee also failed to submit the details/records of the log file showing the IP address with respect to the transactions in the scrip of SEL placed in the trading account of Ms. Meera during the investigation period. In addition to the above, the Noticee also failed to submit the proof of delivery of the contract notes issued by it to Ms. Meera with respect to her transactions in the scrip of SEL during the investigation period. The Noticee had submitted a copy of ITORS agreement, which did not contain the specific details /information as sought by the IA.

b) Ms. Meera, who is a housewife and just a high school pass out, could not have traded in such large quantities without any background in share trading. Further, as per her KYC documents submitted by the Noticee, her annual income was found to be below Rs. 1,00,000. However, Noticee had, for the reasons best known to it, given her huge exposure in the scrip of SEL wherein she had traded in crores in a single day. c) There was no reason for the Noticee to hide this information unless some deceitful practices were being carried out by the Noticee in the client/trading account of Ms. Meera.

13. The Noticee has submitted that there are inconsistencies in the statement of Ms. Meera given to IA. The Noticee has also sought the cross examination of Ms. Meera as her statement was relied upon by the DA. The Noticee has pointed out inconsistencies in the statement of Ms. Meera, some of which are given below:

A) In reply to one question she has replied that someone or the other gave her information (regarding the share market) and that she was holding shares whereas in response to another question Ms. Meera has replied that the Noticee was trading on her behalf and misused her account. B) In answer to another query Ms. Meera said that she has no knowledge as to when she started trading in the market and regarding any reason for trading whereas as mentioned above, she has said that someone or the other gave her information (regarding the share market) and that she was holding shares.

14. The Noticee has submitted that Mr. Chetan Wadhwa, i.e. the brother of Ms. Meera introduced her to the Noticee for opening the trading account and it was Mr. Chetan who was coordinating with the Noticee on behalf Ms. Meera. The Noticee has also submitted that the bank account of a client cannot be operated by a stock broker and that Ms. Meera had received and paid funds to the Noticee. The Noticee has also stated that Ms. Meera did not raise any grievance with respect to the impugned trades at that point in time. In conclusion, it has been submitted that, having regard to the inconsistencies in the statement of Ms. Meera and having regard to the fact that she never objected to the trades undertaken in her account, the Noticee cannot be charged with violation of Regulations 3 (a), (b), (c), (d) and 4 (1) of PFUTP Regulations along with Clauses A(1), A(2), A(3), A(4) and A(5) of Code of Conduct for stock brokers as mentioned in Schedule II read with Regulation 7 of Stock Brokers Regulations. 15. I note that the Noticee has pointed out several inconsistencies in the statement of Ms. Meera.

I also note that, an administrative warning has been issued against the client (Ms. Meera) for the same trades. I also note certain other facts viz., a bank account can only be operated by the holder of the account, the brother of the client (Ms. Meera) was a remisier with the Noticee and the funds used to buy the shares of SEL were received in the bank account of Ms. Meera from one Hanuman Enterprises and the sale proceeds were also transferred to the same Hanuman Enterprises, who has not been found to be connected with the Noticee. From these facts, it is not clear whether the trades were executed by the Noticee on its own as alleged by Ms. Meera or on instruction of Ms. Meera or her brother, Mr. Chetan Wadhwa as claimed by the Noticee. I note that the Noticee has been charged separately for not maintaining proper records in terms of provisions of Regulation 17 read with Regulation 18 of the Stock Broker Regulations and also the provisions of Circulars SMDRP/POLICY/CIR-06/2000 dated January 31, 2000, SMDRP/Policy/Cir-48/2000 dated October 11, 2000 and MRD/DoP/SE/Cir-20/2005 dated September 08, 2005. I find that the inability of the Noticee to produce information sought by the IA, which it was required to maintain and for which it has been separately charged, may not by itself be sufficient to draw an inference that the Noticee was involved in executing such trades on its own.

In view of the above facts and circumstances, the allegation against the Noticee with respect to the misuse of the clients account does not stand established.

Failure to transfer the securities to the demat account of the client within the prescribed time period

16. The ER has observed that the Noticee had failed to deliver the securities to the demat account of Ms. Meera within 24 hours of receiving the securities in its pool account. The ER observes that there was a purchase of 5,08,717 shares and sale of 4,36,981 shares i.e. a net purchase of 71,736 shares of SEL from the trading account of Ms. Meera as on August 21, 2007. It is noted that, the Noticee was required to transfer the shares to the demat account of Ms. Meera on August 24, 2007. However, the Noticee has failed to transfer the shares to the account of Ms. Meera on the stipulated date. The Noticee has not denied the same but has submitted that Ms. Meera had informed the Noticee on August 24, 2007 that she would like to sell the said shares on August 27, 2007, which was the next working day (since August 25 and 26, 2007 were weekend). In light of this, the Noticee has mentioned that it had withheld the transfer of shares in her demat account to save cost of transfer of shares to her. I find that the Noticee has not provided any evidence to show that the shares were withheld with the consent of Ms. Meera and I find that in terms of the SEBI Circular No. MRD/DoP/SE/Dep/Cir-30/2004 dated August 24, 2004 the Noticee had an obligation to transfer 71,736 shares of SEL to the account on Ms. Meera on August 24, 2007 which it had failed to do and therefore, the Noticee has failed to comply with the provisions of the SEBI Circular No. MRD/DoP/SE/Dep/Cir-30/2004 dated August 24, 2004.

Acceptance of cash

17. The ER has mentioned that the Noticee had received an amount of Rs. 17,98,200/-in cash from Ms. Meera on August 03, 2007, as was observed from the client ledger of Ms. Meera, which was maintained by the Noticee. The Noticee has stated that it was the rarest of rare cases and Ms. Meera’s brother, Mr. Chetan Wadhwa had deposited the said cash. In this regard, I note that SEBI Circular no. SEBI/MRD/SE/Cir-33/2003/27/08 dated August 27, 2003, stipulates that a stock broker cannot accept cash from clients for securities transactions in stock exchanges or as margin for purchase of securities from its client and I conclude that the Noticee has violated SEBI Circular no. SEBI/MRD/SE/Cir-33/2003/27/08 dated August 27, 2003 by accepting cash from Ms. Meera.

Direction:

18. Taking into consideration the recommendation of the DA dated August 21, 2018 recommending prohibiting the Noticee not to register new/fresh clients for 3 months, the submissions of the Noticee in reply to such recommendation and the above findings, I, in exercise of the powers conferred upon me in terms of Section 12(3) and Section 19 of the SEBI Act, 1992 read with Regulation 28 of the Intermediaries Regulations, hereby prohibit SIC Stocks and Services Private Ltd. Stock Broker- NSE & BSE [SEBI Registration Nos.: INB011180339/INB231180333] from taking up/ registering any new clients for a period of two months. 19. The order shall come into force with immediate effect. 20. A copy of this order shall be served on all recognized Stock Exchanges, Commodity Derivatives Exchanges, Registrars and Transfer Agents and depositories to ensure compliance with above directions.

-Sd- Place: Mumbai ANANTA BARUA Date : February 07, 2020 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA