Order passed in respect of Mr. Anant Deep Katare

ORDER Under Sections 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with Regulations 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003, in respect of Mr. Anand Deep Katare (PAN:AEDPK8503M).

1. Securities and Exchange Board of India (“SEBI”) had conducted an investigation into the unusual price movement of several scrips during the period from April 01, 2008 to May 31, 2008 to ascertain any instances of contravention of provisions of SEBI Act, 1992 (“SEBI Act”) read with SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations 2003 (“PFUTP Regulations”). The investigation revealed that Mr. Anant Deep Katare ("Noticee") the fund manager of DBS Chola Mutual Fund (Now known as L&T Mutual Fund [ “DBS Chola”]), along with other persons had colluded with one Mr. Vikas Kumar Upadhyay ("V.K. Upadhyay") and his brother Mr. Reshabh Kumar Upadhyay ("R.K. Upadhyay") who allegedly traded ahead of the orders placed by DBS Chola on the basis of prior information given by the Noticee, thereby indulging in manipulative, fraudulent and unfair trade practice of front running and earned profit of `3.67 lakh.

2. Based on the findings of investigation a Show Cause Notice (“SCN”) dated August 06, 2010 was issued to the Noticee under Sections 11 and 11B of the SEBI Act to show cause as to why appropriate action including restraining him from buying, selling or dealing in securities for a specified period should not be issued against him for the violations alleged in the SCN.

3. As per the SCN, it was inter alia alleged against the Noticee that – i. The Noticee along with another fund manager (Mr. Anant Deep Katatre) and dealer (Mr. Mayur Joshi) colluded with V. K. Upadhyay and R.K. Upadhyay in front running DBS Chola, thereby indulging in manipulative, fraudulent and unfair trade practice.

ii. The SCN alleges that some telephone calls were exchanged between Noticee and R.K. Upadhyay. The SCN gave details of those calls along with the days on which V.K. Upadhyay allegedly executed trades ahead of DBS Chola. iii. During the course of investigation, the Noticee vide statement dated March 11, 2010, denied knowing R.K. Upadhyay and V.K. Upadhyay and stated that he had no idea about the transactions where V.K. Upadhyay was front running DBS Chola. The Noticee also mentioned that though a joint conference call with DBS Bank was made, no communication with any particular person in DBS Bank was done on regular basis. The Noticee denied having spoken to R.K. Upadhyay and mentioned that during April – May 2008 his official extension number was 4017. The Noticee also denied knowing anyone in Societe Generale and submitted that he had not communicated any information to anyone regarding the transactions of DBS Chola except his dealer. iv. During the course of investigation, Mr. Sanjay Sinha, Chief Executive Officer (“CEO”) of DBS Chola, vide statement dated March 11, 2010 submitted that at the time of joining (on September 2008), the fund managers (Noticee and Mr. Bajrang Bafna) and the dealer (Mr.

Mayur Joshi) were operating from the same room. The fund managers take the decision to invest in a particular scrip and the same is conveyed to the dealer for execution. Hence, the Noticee was privy to the trading strategy of DBS Chola. It is also stated by CEO that fund managers occasionally interacted with officials of DBS Bank as they were one of its distributors. Vide letter dated March 12, 2010, Mr. Sanjay Sinha also reconfirmed the landline(66574011 and 66574017) and mobile number (9967519157) used by the Noticee and stated that extension number 4011 and 4017 were used by the Noticee during the relevant time. v. During the course of investigation, R.K. Upadhyay vide his statement dated March 25, 2010 stated that he had worked with Societe Generale and DBS Bank in the wealth management department in the sales side. It is also admitted by R.K. Upadhyay that he used to call the Noticee and the other fund manager and dealer for portfolio updates of the clients. In view of the above statements and evidence, it is alleged that the Noticee disclosed information regarding the trading activity to R.K.

Upadhyay. vi. It is also alleged that R.K. Upadhyay passed on the information about the trading strategy of DBS Chola to V.K. Upadhyay for front running DBS Chola and earned a profit of `3.67 lakh.

4. The Noticee filed its reply to the SCN vide letter dated October 8, 2010. Thereafter, an opportunity of personal hearing was granted to the Noticee on April 10, 2013. The Noticee vide his reply and during the course of the personal hearing, inter alia made the following submissions: i. It is denied that the Noticee had spoken or otherwise provided information to V.K. Upadhyay or R.K. Upadhyay regarding any trades executed by DBS Chola and/or that he had colluded with V.K. Upadhyay or R.K. Upadhyay or any other person or entity in front running DBS Chola and it is denied that the Noticee had indulged in manipulative, fraudulent or unfair trade practices. ii. None of the documents referred to and none of the statements by V.K. Upadhyay or R.K. Upadhyay implicate the Noticee or refer to him as a collaborator of trades. iii. It is denied that the Noticee was allotted the telephone number 66574011. The Noticee was allotted the telephone number 66574017 by DBS Chola. The Business cards issued by DBS Chola when the Noticee was Assistant Vice President and Senior Investment Analyst, Assistant Fund Manager and Fund Manager indicates this aspect. iv. On April 09, 2008 i.e. the day the Noticee was alleged to have called or spoken to R.K. Upadhyay, the Noticee was not present in the office. In this regard the attendance records from DBS Chola are submitted which reveals that the Noticee had signed in at 09:14 and signed out of the office at 09:16 hrs. v. The telephone number 66574011 was available for use to all persons (fund managers, research analysts, dealers) after the resignation of the CEO and was not allotted to the Noticee. It is may be noted that the extension number 4011 was used when the Noticee was absent from the office. vi. R.K. Upadhyay was a sales manager for the products of DBS Bank and R.K. Upadhyay knows the Noticee as one of the fund managers of DBS Chola. There are more than 7000 distributors and it is humanly impossible to remember all of them or recall the conversations made with each of them or with any of the employees of investment bankers, brokers, etc. Besides this, R.K. Upadhyay and V.K. Upadhyay had not made any statement implicating the Noticee.

5. The Noticee was given an opportunity to cross examine Mr Reshabh on June 28, 2011. The following are noted from the same: i) R.K. Upadhyay mentioned that 66574011 was a common telephone number at DBS Chola and he had called several persons on the said number. ii) R.K. Upadhyay had common meetings with all the fund managers and relationship managers of DBS Cholamandalam; iii) R.K. Upadhyay had not met the Noticee for personal reasons or for any other reason; iv) R.K. Upadhyay made phone calls but he cannot recall with whom he interacted.

6. The Noticee applied for consent on June 19, 2013. However, the said application was rejected by SEBI vide letter dated August 21, 2013 on the ground of delay. In view of the facts of the case, before moving ahead to consider the violations alleged to have been committed by the Noticee, I consider it appropriate to refer to the relevant provisions of the SEBI Act and PFUTP Regulations which read as under:- 12A(e) of the SEBI Act: No person shall directly or indirectly— (e) deal in securities while in possession of material or non-public information or communicate such material or non-public information to any other person, in a manner which is in contravention of the provisions of this Act or the rules or the regulations made thereunder; PFUTP Regulations: Prohibition of certain dealings in securities 3. No person shall directly or indirectly— (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any securities listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made thereunder; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made thereunder.

4. Prohibition of manipulative, fraudulent and unfair trade practices:- (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities.

7. I have considered the SCN issued to the Noticee, his reply and the submissions made by his authorized representative during the personal hearing before me and all other relevant material available on record. In light of the same, I shall now proceed to deal with the charges levelled against the Noticee in the SCN.

8. As per SCN, it is alleged that the Noticee along with other persons had colluded with V.K. Upadhyay and R.K. Upadhyay in front running DBS Chola, thereby indulging in manipulative, fraudulent and unfair trade practice.

In this regard, I note that- i. There were several telephone calls exchanged between Noticee and R.K. Upadhyay. The details of the same is described in the following table :- Duration Time in Date Telephone Telephone Answered in Hh:Min From No. To No. Min:Sec 9/4/2008 13:39 Noticee 66574011 R.K.Upadhyay 9322128351 YES 05:53 15/4/2008 10:26 R.K.Upadhyay 9322128351 Noticee 66574011 NO - 17/4/2008 16:43 R.K.Upadhyay 66309697 Noticee 66574011 NO - 17/4/2008 16:47 R.K.Upadhyay 66309697 Noticee 66574011 NO - 22/4/2008 11:47 R.K.Upadhyay 9322128351 Noticee 66574011 NO - 23/4/2008 11:46 R.K.Upadhyay 9322128351 Noticee 66574011 YES 00:05 24/4/2008 09:27 R.K.Upadhyay 9322128351 Noticee 66574011 YES 00:34 24/4/2008 12:29 R.K.Upadhyay 9322128351 Noticee 66574011 NO - 16/5/2008 13:21 R.K.Upadhyay 66309697 Noticee 66574011 YES 02.03 16/5/2008 18:31 R.K.Upadhyay 66309697 Noticee 66574011 NO - ii. It is observed from the above table that communication between the Noticee and R.K. Upadhyay were done through the official landline number 66574011. The Noticee contended that the said landline telephone number was not allotted to him.

In this regard, SEBI sought confirmation from Mr. Sanjay Sinha, CEO of DBS Chola who had reconfirmed the mobile numbers and landline numbers were in fact used by the Noticee and stated that extension number 4011 and 4017 were used by the Noticee during the relevant time. The said letter also carried the remark that the extension number 4011 was allotted to ex-chief investment officer and was used by everyone in the department. I this regard, it is noted that during cross examination, R.K. Upadhyay had mentioned that the telephone number 66574011 was a common number at DBS Chola and had called several persons on the said number. iii. The Noticee had submitted copies of Business cards issued by DBS Chola when he was Assistant Vice President and Senior Investment Analyst, Assistant Fund Manager and Fund Manager. It is noted from the cards that only 66574017 was mentioned as the official landline number of the Noticee. iv. It is noted from the attendance records from DBS Chola that on April 09, 2008 i.e. the day the Noticee is alleged to have called or spoken to R.K. Upadhyay, the Noticee had signed in at 09:14 and signed out of the office at 09:16 hrs. v. It is noted that though R.K.

Upadhyay admitted that he knew the Noticee as one of the fund managers of DBS Chola, he (R.K. Upadhyay) had not made any statement implicating that the Noticee had passed any information regarding the trading strategy of DBS Chola. vi. It is also noted that out of the ten phone calls mentioned in the above call records, no calls are made from the mobile number used by the Noticee. The phone calls alleged to have been made by the Noticee appear to be from the landline which is stated to be used by everyone in the department. It is submitted by the Noticee that the landline number was used when he was absent from the office. 9 Upon a consideration of the above facts and circumstances, mentioned from paras 8(i) to (vi), I find that no conclusive evidence has been brought on record to prove that the Noticee being the fund manager of DBS Chola had passed on the information of the trading strategy of DBS Chola to R.K. Upadhyay and V.K. Upadhyay. It is pertinent to mention here that apart from the telephonic records, details which have been discussed in the preceding paragraphs, no evidence has been brought on record.

It is observed that no phone calls appear to have been made by the Noticee from his mobile phone, and considering other facts and circumstances of the case such as the impugned telephone calls were made from a common telephone which was also available to other persons sharing the room, it is difficult to come to any conclusion regarding the role of the Noticee in the manipulation. In this context, it is noted that R.K. Upadhyay also denied having received any information from the Noticee besides having attended some common meetings with the Noticee.

10 It is pertinent to mention that the crux of the matter pertains to receipt of information (trading strategy of DBS Chola) by R.K. Upadhyay and its onward transmission to V.K. Upadhyay who in turn executed the trades on the basis of the said information. In this context, it is noted that though proceedings under Sections 11 and 11B of the SEBI Act were initiated against R.K. Upadhyay and V.K. Upadhyay, the same was consented by SEBI vide order dated April 13, 2012 and dropped the proceedings upon payment of settlement charges of ` 10 lakh each. Similarly, the adjudication proceedings initiated against DBS Chola for the alleged violation of SEBI Act read with Regulations 25(2), (3) and 68 (h) of the SEBI (Mutual Fund)Regulations,1996 were also consented by SEBI vide order dated December 16, 2010 upon payment of settlement charges of ` 10 lakh.

11 Taking into consideration of the above facts and circumstances narrated above and in the absence of conclusive evidence, I am inclined to give the benefit of the doubt to the Noticee in respect of the alleged violations.

12 In view of the foregoing, I, in exercise of the powers conferred upon me by virtue of Section 19 read with Section 11 and 11B of the SEBI Act and regulation 11(1) of the PFUTP Regulations dispose of the Show Cause Notice dated August 06, 2010 issued against Mr. Anant Deep Katare without any directions.

Place: Mumbai S. RAMAN Date: September 24, 2014 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA