| Home | Back |
|
SECURITIES
AND EXCHANGE BOARD OF ADJUDICATION
ORDER IN RESPECT OF RAJESH B. SHAH, TRADE NAME (M/S RAJ INVESTMENTS) �
SUB-BROKER (SEBI REGN. NO. INS 230796018) OF M/S PSE SECURITIES LIMITED UNDER
SECTION 15 I OF THE SEBI ACT, 1992 READ WITH RULE 5 OF SEBI (PROCEDURE FOR
HOLDING INQUIRY BY ADJUDICATING OFFICER) RULES, 1995 Whereas Securities and Exchange Board of India (SEBI)
had conducted inspection of the books of accounts and other documents of Rajesh
B. Shah (hereinafter referred to as �Member�) and pursuant to this,� appointed me as Adjudicating Officer vide
Order dated January 07, 2004 under Rule 3 of SEBI (Procedure for holding
inquiry by Adjudicating Officer) Rules, 1995 (hereinafter referred to as �said
rules�) to inquire into and adjudge under section 15HB of the SEBI Act. It appears that the inspection report has observed
following alleged violations levelled against the member: Alleged
violations:
Section
15HB of SEBI Act, 1992 reads as under : �Penalty for
contraventions where no separate penalty has been provided : Whoever
fails to comply with any provision of this Act, the rules or the regulations
made or directions issued by the Board thereunder for which no separate penalty
has been provided, shall be liable to a penalty which may extend to one crore
rupees�. Section 15
B of SEBI Act, 1992 reads as under : �if any person, who is registered as an intermediary
and is required under this Act or any rules or regulations made thereunder to
enter into an agreement with his client, fails to enter into such agreement, he
shall be liable to (a penalty of one lakh rupees for each day during which such
failure continues or one crore rupees, whichever is less)� 1.0. ���� SHOW CAUSE NOTICE AND REPLY Accordingly, Show Cause Notice dated 1.0.2�� REPLY Accordingly, the Member has sent a detailed reply
vide letter dated 1.0.3.� PERSONAL HEARING The personal hearing in the matter was fixed on In view of the above, I now deal with the submissions
made by the member� before me for the
purpose of this adjudication. 2.0.����� THE REPLY OF THE MEMBER VIS-A-VIS THE
CHARGES AND THE FINDINGS. Charge� 1 : ��� Irregularities in maintenance of
confirmation memos: Reply:������������ As
the client business, which I am doing at that time was mainly for relatives.� The total turnover in % of client was not
even 1% of total turnover.� So such
irregularity happened.� But after the
inspection I stop the client business. Charge 2 : ���� Irregularities
in maintenance of client registration forms and not entering into agreement
with clients : Reply: ����������� As stated in the reply dated Charge 3:������ Brokerage
charged above the prescribed limit: Reply: ����������� Actually, I did not charge brokerage
above the prescribed limit.� But, in some
transactions it seems to be charged more as shown in the inspection
report.� As the charging broker includes
the Demat charges/ Stamps Charges TO.O. Charges etc. irrespective of quantity The member stated that after conducting the inquiry by
SEBI officials, NSE also conducted inquiry and for the same violations NSE
penalized for Rs. 20,000/- and to this effect a letter from NSE will be
submitted by Charge 4 : ���� Delayed
payment of monies / deliveries of securities to clients in violation of
Regulation 26 (vi) of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 Reply : ���������� During
the personal hearing the member, inter-alia, mentioned that� �clients are trading on short term
basis.� So they find it convenient to
allow their shares as well as credit balance with me.� Further, I am ready to submit the consent
letters from the following clients for your perusal. 1.
Shri Milind
Bhide 2.
Shri D D Gujar 3.
Smt Kiran Patwa 3.0.����� FINDINGS I had gone through the reply of the member in detail
as well as the oral submissions made by him before me at the time of personal
hearing.� I have observed that the
submissions made by the member with respect to charge no. 1, 2 and 3 are
acceptable and hence, I do not hold him guilty.�� However,�� with
respect to charge no.4, viz. delayed payment of monies / deliveries of
securities to clients, the member has stated in his reply dated 4/8/2004 and
oral submissions made before me at the time of personal hearing that �most of these
clients were his relatives and when holding securities for a short period of
time and we are maintaining current account with the member�.� In this regard when I asked specifically to
produce consent letters from his clients to authorize him to hold the payments
as well as securities, the member has submitted the letters from his clients
namely, Shri Milind Bhide, Shri D D Gujar and Smt Kiran Patwa.� I had examined these three letters and found that all
these three letters were dated 31/3/2003 whereas in the case of Shri Milind
Bhide the securities were lying with the member since 5/7/2002 in the scrip of
Usha India, 12/7/2002 in the scrip of SRG Infotech, 6/12/2002 in the scrip of
SR Steel, 14/8/2002 in the scrip of Samtel Colour.�� Further, in the case of Shri D.D. Gujar the
securities were lying with the member since �With regard to
Smt Kiran Patwa, I observed the securities were lying with the member since I further observed the quantity of all these scrips
for the above mentioned clients were varying from 50 to 1000.� I have examined Regulation 26(vi) of SEBI ( Stock
Brokers & Sub �Brokers) Regulations,1992 which interalia states as under
:-- � Failure to deliver any security or make payment of
the amount due to the investor within 48 hours of the settlement of trade
unless the client has agreed in writing otherwise� In the instant matter, I observed from the available documentary
evidence, that all these securities were dealt in the year 2002. Whereas the
consent letters produced by the member were dated According to me normally at the time of settlement,
the member should have asked his clients with regard to their instructions in respect
of holding securities and making payment. So, he would have got instructions at
the time of settlement or prior to that date of settlement. Whereas, the
consent letters were dated 31.03.2003 i.e after lapse of almost 8-9 months from
the date of settlement. . In view of this, I do not accept these consent
letters produced before me by the member and I am of the opinion that the
member has obtained these consent letters subsequently from his clients to
create an eye-wash and to cover lapses on his part.� In view of this, I do not have any hesitation to hold
him guilty under Regulation 26(vi) of SEBI (Stock Brokers and Sub-Brokers)
Regulations, 1992. 4.0.����� CONCLUSION In order to adjudge the quantum of penalty, I have considered
the following factors : a)
the amount of
disproportionate gain or unfair advantage, wherever quantifiable, made as a
result of the default, b)
the amount of
loss caused to an investor or group of investors as a result of the default and
c)
the repetitive
nature of the default. As regards the disproportionate gain or unfair
advantage there are no quantifiable figures available with respect to the
default observed on the part of the member. There are also no figures or data
to quantify the amount of loss caused to an investor or group of investors as a
result of the default. 5.0.����� ORDER The submissions of the member have been considered and
dealt in detail as above and in view of the findings arrived at, I consider it
to be a fit case for imposition of penalty under section 15 HB �of the SEBI Act, 1992. In view of the same and
in exercise of the powers conferred under section 15-I (2) of the SEBI Act,
1992, read with, Rule 5 of the said Rules, I hereby impose a penalty of Rs. 40,000/-
(Rupees Forty Thousand Only) on the member. The member shall pay this amount of
penalty of Rs. 40,000/- by way of demand draft in favour of� "SEBI - Penalties Remittable to
Government of India" �payable at Mumbai within 45 days of receipt of
this order. The said demand draft
should be forwarded to the Chief General Manager of SEBI, MIRS Department
(DPS-I) at SEBI,� World Trade Centre, 29th Floor, Cuffe
Parade, Mumbai 400 005. SANDEEP P.
DEORE ADJUDICATING
OFFICER Date : Place : Mumbai |
|
 | Printer Friendly page |  | Email this page |
