Order with respect to Ashok Jain

WTM/RKA/IVD/ID-4/32/2012 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: RAJEEV KUMAR AGARWAL, WHOLE TIME MEMBER ORDER Under Sections 11, 11(4) and 11 B of the Securities and Exchange Board of India Act, 1992 read with Regulation 11 of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. In the matter of Bang Overseas Limited. In respect of: Mr. Ashok Jain (PAN: AAUPJ7016M) Date of hearing: February 29, 2012 Appearances: For Noticee: Mr. Bharat Merchant, Advocate Mr. Ashok Jain For SEBI: Mr. Santosh Kumar Shukla, Joint Legal Advisor Mr. Siddhesh Lotlikar, Assistant General Manager Mr. Amitesh Kumar, Assistant Legal Advisor, and Mr. Benoy Melshiyar, Assistant Legal Advisor 1. Securities and Exchange Board of India (‘SEBI’) during routine market surveillance observed synchronized deals in the scrips namely Cals Refineries Limited (‘Cals’), Confidence Petroleum India Limited, Bang Overseas Limited (‘Bang’), Shree Precoated Steels Limited (presently known as Ajmera Realty & Infra India Limited) and Temptation Foods Limited; (hereinafter collectively referred to as ‘ the five scrips’).

On examination of the trade data relating to the five scrips, inter-linkages between certain entities (hereinafter collectively referred to as the ‘connected clients’) dealing in the five scrips were noticed in the form of off-market transactions and market transactions including synchronized deals. Mr. Ashok Jain was part of the connected clients. 2. During the preliminary investigation, the connected clients were found to be having large trading concentration in the five scrips and a substantial portion of their trading amongst themselves in synchronized nature was found to have contributed to the increase in the market volume of those five scrips. In view of the same, SEBI, vide an ad interim ex-parte order dated June 04, 2009 restrained, inter-alia, Mr. Ashok Jain from accessing the securities market and further prohibited him from buying, selling or dealing in the securities market, directly or indirectly, till further directions. SEBI passed an order dated March 10, 2010 confirming the directions passed in ad interim ex-parte order. 3. SEBI completed the investigation relating to trading in the scrip of Bang for the period March 1, 2008 to February 28, 2009 and issued a show cause notice dated July 29, 2011 (‘SCN’) to Mr. Ashok Jain (‘the noticee’) under Sections 11, 11(4) and 11B of the SEBI Act read with regulation 11 of SEBI (Prohibition of Fraudulent Unfair Trade Practices relating to Securities Market) Regulations, 2003 (‘PFUTP Regulations’) with respect to his trading in the scrip of Bang.

The SCN alleged that Mr. Ashok Jain had executed reversal trades with connected clients, which resulted in the creation of artificial volumes in the scrip of Bang. The acts of the noticee were, thus, alleged to be in violation of Regulation 3(a), (b), (c), (d) and Regulation 4(1), 4(2) (a) and (g) of the PFUTP Regulations read with Section 12A(a), (b) and (c) of SEBI Act, 1992. 4. The notice vide letters dated September 8, 2011 and January 04, 2012 replied to the SCN and sought an opportunity of personal hearing. An opportunity of personal hearing was granted to the noticee on February 29, 2012, when Mr. Bharat Merchant, the authorized representative along with the noticee, appeared and made submissions. 5. The submissions of the noticee, inter alia, are as under: a. He is not connected with any of the entities referred to as ‘connected clients’. b. Mr. Ashok Jain’s contribution is of 0.02% of the total market volume in the scrip of Bang. This is very negligible quantity of shares during entire period of investigation of 26 months and cannot create a misleading appearance of trading in the market. c. Mr. Ashok Jain had executed 53 trades in the scrip of Bang on 14 trading days.

Out of these 53 trades, 24 trades were having price difference between buy and sell order. Hence they were not synchronized. Further, 49 out of 53 trades were having quantity difference ranging from 242 to 22,878 shares and thus cannot be called synchronized. 24 orders had difference in time between sell and buy order for more than 1 minute. Hence, 95% of the his trades were not synchronized. Further, all these trades were backed by delivery and beneficial ownership had changed. d. Only in case of 6000 shares of Bang on one day, an order of 6000 shares placed by Mr. Ashok Jain matched with the buy order of Ms. Kiran Jain resulting in trade of 5980 shares. The volume in the scrip of Bang was more than 2 crore shares and 6000 shares matching on one day between the noticee and Ms. Kiran Jain can only be called a coincidence.

6. I have carefully considered the SCN, the reply, the submissions made during the hearing and all the material available on record. I note that the noticee was part of the connected clients and he has not disputed the transactions mentioned in the SCN. 7. I note from the SCN that Mr. Ashok Jain and Ms. Kiran Jain are husband and wife. Further, the following facts support his relation with other connected clients with whom he had dealt in shares of Bang. (a) Further, Chandra Financial Services P. Ltd. ('Chandra'), Kundan Leasing and Finvest P. Ltd. ('Kundan'), Jay Investrade P. Ltd. ('Jay'), HSM Financial Services P. Ltd. ('HSM') and Shanti Financial Services P. Ltd. (‘Shanti’) have common directors namely Harsh Shirish Maniar and Jay Shirish Maniar and have common address at Achal Bhuvan, 3rd Floor, 21 Modi Street, Fort, Mumbai. (b) Mr. Ashok Jain vide his letter dated October 14, 2009 had informed that he had financial dealings with Chandra and Shanti and also received shares in off market from Maruti Securities Ltd. (‘Maruti’), Kundan and Jay. 8. In the SCN, it is alleged that Mr. Ashok Jain traded for 4,13,910 shares of Bang out of which 3,68,066 shares were traded during the period April – July 2008 in 14 trading days i.e. constituting 88.92% of his total trades.

Mr. Ashok Jain bought 2,35,000 shares wherein the major counterparty selling clients were Maruti (52,529 shares), Kundan (50,751 shares), Chandra (23,623 shares), Jay (22,402 shares) (i.e. 63% of his total buy trades). Further, he sold 1,33,066 shares wherein the major counterparty buying clients were Kundan (39,350 shares), Jay (33,906 shares), Chandra (20,980 shares), Maruti (12,795 shares) and Kiran Jain (6,442 shares) (i.e. 85% of his total sell trades). I note that 88.92% of his total trades were done just on 14 trading days between April and July 2008. Further, I note that Mr. Ashok Jain had repeatedly done trading with the connected counterparty clients, in this case to the extent of 63% of his total buy trades and 85% of his total sell trades and it cannot be believed to be mere coincidence. Thus, it will be appropriate to infer that Mr. Ashok Jain executed several trades with connected clients to create artificial volume in the scrip of Bang. 9. I further note that in the SCN it is alleged that Mr. Ashok Jain had also indulged in synchronized transaction. It was observed that on May 08, 2008 Mr. Ashok Jain placed a sell order of 6,000 shares at 11:29:49 hrs. at the price of ₹228.20 and Ms. Kiran Jain placed a buy order of 6,000 shares at 11:29:49 hrs. at the price of ₹228.20.

In this order, trade for 5,980 shares got executed at the same time. I therefore, find that this trade was synchronized in term of price, quantity and time. 10. In my view, several trades particularly synchronized trades of the noticee with the connected entities are of too much of a coincidence in anonymous screen based trading system. I find that such trading with the connected clients in anonymous screen based trading could be possible only with the premeditated plan or device with involvement of the noticee. Further, when manipulators operate in large group, the individual contribution could be small, but the group as a whole has a larger impact on the securities market. 11. In this case, the noticee was part of group of connected clients and had dealt in the shares of Bang with other connected clients. The trades of the noticee have to be considered as part of overall plan of manipulative trading in the five scrips amongst the connected clients. I note that the noticee's trades are also significant and have contributed to the creation of artificial volume in the scrip of Bang which led to creation of false and misleading appearance of trading in the scrip without intention of change of beneficial ownership.

I, therefore, find that Mr. Ashok Jain has violated Regulations 3(a), (b), (c), (d) and 4(1), 4(2)(a) and (g) of the PFUTP Regulations and section 12A(a), (b) and (c) of SEBI Act. I, however, note the noticee has been restrained from accessing the securities market and prohibited from buying, selling or dealing in the securities market since June 4, 2009. In facts and circumstances of the case of the noticee, I find that the restraint/debarments imposed upon him vide orders dated June 04, 2009 and March 10, 2010 need not continue further. 12. In view of the foregoing, I, hereby dispose of the Show Cause Notice dated July 29, 2011 issued to Mr. Ashok Jain without passing any further direction against him. 13. This Order shall come into force with immediate effect. 14. A copy of this Order shall also be sent to all recognized stock exchanges and depositories.

RAJEEV KUMAR AGARWAL DATE: SEPTEMBER 07, 2012 WHOLE TIME MEMBER PLACE: MUMBAI SECURITIES AND EXCHANGE BOARD OF INDIA