Order passed in respect of Mr. Mayur Joshi

ORDER Under Sections 11 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, against Mr. Mayur Joshi (PAN: AEJPJ0812Q).

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. Mayur Joshi ("Noticee") the dealer 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 the Noticee from buying, selling or dealing in securities for a specified period should not be issued against him for the violations alleged in the SCN viz., Section 12 A (e) of the SEBI Act read with Regulations 3 and 4 (1) of the PFUTP Regulations.

3. As per the SCN, it was inter alia alleged against the Noticee that – i. The Noticee along with fund managers of DBS Chola had 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 several 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 was allegedly executed trades ahead of DBS Chola.

iii. During the course of investigation, the Noticee vide statement dated March 11, 2010 denied knowing either V.K.Upadhyay or R.K.Upadhyay. However, on being confronted with the call records exchanged with R.K.Upadhyay, the Noticee admitted that the calls were made to give a complimentary match ticket to a gentleman from DBS Bank.

iv. During the course of investigation, Mr. Sanjay Sinha, Chief Executive Officer (“CEO”) of DBS Chola, vide statement dated March 11, 2010 submitted that he had joined DBS Chola on September 13, 2008. Mr. Sanjay Sinha stated that at the time of joining, the Noticee (Dealer) and the Fund Managers (Mr. Bajrang Bafna and Mr. Anant Deep Katare) were operating from the same room and there was no permanent CEO during the period April- May 2008 and only after he joined the dealer and the fund managers were separated. The fund managers took the decision to invest in particular scrip and the same is conveyed to the dealer for execution. Hence, the Noticee was privy to the trading strategy of DBS Chola.

v. During the course of investigation, R.K.Upadhyay vide 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 in the SCN 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 who ended up earning a profit of `3.67 lakh as a result of the front running.

4. The Noticee vide letter dated September 25, 2010 replied to the SCN. 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. At the outset the Noticee denied all the charges brought out in the SCN and stated that he did not collude with V.K.Upadhyay or R.K.Upadhyay for indulging in any manipulative, fraudulent and unfair trade practices. There is no concrete material for connecting the Noticee and the Upadhyay brothers.

ii. With regard to the telephone calls made between the Noticee and R.K.Upadhyay, the landline number was common and it was wrong to attribute the telephone calls of April 9, 2008 and April 15, 2008 to him just because the number was assigned to him. The said calls were not answered by anyone in DBS Chola. There is no text of what transpired during the telephone calls. iii. The inference drawn on the basis of telephone data log of 5 calls on 4 days is erroneous as there was no call received/made by the Noticee on the date for which front running was alleged. Also the contents of the communication were not available. The dates of front running and dates of telephone calls attributed to him are different and there is no correlation between the dates.

iv. With regard to the statement recorded by SEBI, as the statement was recorded on March 11, 2010 for the telephone calls made on May 16, 2008 (about 2 years ago), it was impossible to remember/recollect such stray incident or its details. The Noticee denied knowing V.K.Upadhyay and R.K.Upadhyay. The inference that the Noticee was trying to cover up his earlier reply was misconceived as he did not know R.K.Upadhyay and had no relationship – commercial or otherwise-with him. The Notice stated that he never talked to R.K.Upadhyay for any specific purpose after he joined DBS Chola except on May 31, 2008. The said call was made at the instance of Mr. Bajrang Bafna(fund manager) to give the IPL cricket match tickets to one gentleman from DBS Bank.

v. The call records did not establish that he was communicating with R.K.Upadhyay as the calls made from the landline number was kept in the common room and after the call from the mobile number, there was no impugned trades executed by V.K.Upadhyay. that the other details stated in the SCN are cryptic, skeleton, immaterial and incomplete, irrelevant and do not go to the root of the charge. The other evidences are of nit-picking nature in-cohesive and bereft of any evidentiary value.

vi. There is no mention in the SCN as regards what specific information was provided, when, to whom, contents thereof, on which dates, through which mode etc. The said allegations are general and generic in nature. It is also stated by the Noticee that he was not in a position to know the trading strategy in advance from fund managers. Also, he had no contemporaneous knowledge about any strategy of DBS Chola. As a dealer, the Noticee was merely a conveyor of orders to empanelled brokers (which were conveyed to him by the fund managers).

vii. There was always some senior executive in charge of the duties of CEO. Sharing the same room with fund managers cannot per se be treated as resulting into ‘connivance a lot easier' as alleged in the SCN.

viii. The role of the Noticee as a dealer was limited only to the extent of placing orders decided by Fund Managers to the empanelled brokers through recorded telephone lines. It is Fund Managers' authority and discretion to decide scrip, quantity, price and timings for buying and selling for the Mutual Fund.

ix. That the investigation had referred and relied upon telephone (land line/ mobile) records of about 46 days and 141 instances, out of which the name of the Noticee appeared only on four days and for 5 instances. If he was a part of a group, a large number of telephone calls (as in the case of fund manager) would have been received and made to R.K.Upadhyay.

x. As per the call records, whenever the calls were not received at the Fund's end, there was always a trail of returned calls whereas the Noticee has not returned a single call. The one call on April 16, 2008 was not correct as the telephone line was in the common area.

5. 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.

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

7. 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 as alleged in the SCN. The details of the same are described in the following table :-

Duration Time in Date Telephone Telephone Ans: in Hh:Min From No. To No. Min:Sec 9/4/2008 18:11 R.K.Upadhyay 9987506334 Noticee 66574012 NO - 15/4/2008 10:23 R.K.Upadhyay 9322128351 N oticee 66574012 NO - 16/5/2008 12:27 Noticee 66574069 R.K.Upadhyay 9322128351 Y ES 0.54 31/5/2008 15:03 R.K.Upadhyay 9987506334 Noticee 9967066301 YES 01:20 31/5/2008 15:19 R.K.Upadhyay 9987506334 Noticee 9967066301 YES 00:10 ii. It is observed from the above table that the communication between the Noticee and R.K.Upadhyay were done through the official landline number 66574012 and 66574069 and mobile number 9967066301. It is noted that the calls of R.K.Upadhyay to the office landline of DBS Chola (allotted to the Noticee) on April 09, 2008 and April 15, 2008 were not answered by the Noticee or anyone in DBS Chola. As regards the call on April 16, 2008, the Noticee has mentioned in his reply dated September 25, 2010 that office landlines were placed in the dealing room and accessible to the fund managers, dealers and analysts and the said call cannot be attributed to him.

iii. The Noticee vide statement dated March 11, 2010 had mentioned that the orders were placed and trades were executed through recorded lines and he never knew V.K.Upadhyay or R.K.Upadhyay. As regards the phone calls between the Noticee and R.K.Upadhyay on May 31, 2008, it was mentioned in the statement that he was supposed to give a complimentary

IPL cricket match ticket to a gentleman from DBS Bank. Though the explanation given by the Noticee was found to be unacceptable there was no objectionable trade executed after the said calls on May 31, 2008.

iv. It is also noted from the Noticee's statement dated March 11, 2010 that his role was limited only to the extent of placing orders decided by Fund Managers to the empanelled brokers through recorded telephone lines. It is the Fund Managers' authority and discretion to decide scrip, quantity, price and timings for buying and selling for DBS Chola.

v. That the investigation had referred and relied upon telephone (land line/ mobile) records of about (46) days and 141 instances, out of which the name of the Noticee appeared only on 4 days and for 5 instances. It is noted from the reply dated September 25, 2010 that if the Noticee was part of the alleged front running group, numerous telephone calls would have been exchanged with R.K.Upadhyay.

8. Upon a consideration of the above facts and circumstances mentioned from paras 7 (i) to (vi), I find that no conclusive evidence has been brought on record to prove that the Noticee being the dealer of DBS Chola had passed on the information of its trading strategy 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 except one call from the mobile phone of the Noticee on May 31, 2008, all 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.

9. 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.

10. Taking into consideration all the 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.

11. 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. Mayur Joshi without any directions.

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