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SECURITIES
AND EXCHANGE BOARD OF ADJUDICATION
ORDER IN RESPECT OF SURENDRA R. SHAH � SUB-BROKER(SEBI
REGN. NO. INS 230795115), AFFILIATED TO 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 Surendra R. 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 15B and 15HB of the SEBI Act. Alleged
violations:
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)� 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�. 1.0. ���� SHOW CAUSE NOTICE AND REPLY Accordingly, Show Cause Notice dated REPLY Accordingly, the Member has sent a detailed reply
vide letter dated 2.0.����� 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. 3.0.����� THE REPLY OF THE MEMBER VIS-A-VIS THE
CHARGES AND THE FINDINGS. 3.0.1.� CHARGE� : � Irregularities
in maintenance of confirmation memos and client agreement/registration forms I found from the inspection report that the following
deficiencies were observed : �
The counterfoils
were signed but not dated. �
The counterfoils
did not bear pre-printed serial numbers. �
The agreement
does not mention the name of the client with whom the agreement is entered. �
The agreements
were undated �
No witness has
signed the agreement. �
The agreements
were instead of between client and sub-broker of M/s PSE Securities, Member NSE
entered between client and the member. �
The member has
not entered into agreement with of his clients due to not filling the forms and
not collecting the required documents. The above are violations of SEBI Circular no.
SMD/POLICY/CIR/11-97 dated REPLY During the personal hearing the member, inter-alia,
stated that �I have already started taking client�s signature and date on each
confirmation memo issued to clients.� For
the purpose of client�s agreement, I want to give the CA�s certificate stating
all agreements have been updated by FINDINGS During the course of personal hearing the member
submitted that these details are being incorporated subsequently. I agree that
the irregularities have been rectified by the member at later stage.� However, at the time of personal hearing
these irregularities were accepted by the member.� Through these irregularities were of in
technical nature, a member could have avoided the same if he would have shown
proper care and due diligence while dealing with his clients since Know Your
Form is basically useful for the brokers for their knowledge about their
clients and non-filling of columns, details etc will certainly vitiate the very
purpose of such forms.� Therefore, I am
of the opinion that the member has shown negligence and ignored the respective
circular dated 3.0.2.� CHARGE : Failed� to observe Regulations 26(xiv), 26(xv) and
26(xx) of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 REPLY During the personal hearing the member, inter-alia,
stated that I become sub-broker of BSE member in the year 1999-00.� I am going to submit a copy of sub-broker
registration.� However, I admit that I
dealt with BSE/NSE broker without having proper registration from SEBI to act
as sub-broker.� Yes, I accept that there were off the floor
transactions executed by me.� FINDINGS I had gone through the reply by 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 member
has accepted following violations :
I also seen that
the said member was earlier penalized by SEBI for alike violations.� In spite of that I have found that the
irregularities and lapses have been committed by him.�� Normally, once member is penalized for
the violations by the exchange/SEBI then the member become more cautious and
care while dealing with his clients and see that such violations will not be repeated
while dealing in securities market.�
However, in the instance matter I have observed that in spite of such
penalty, the member has not acted diligently and allowed to happened lapses /
irregularities as narrated by the inspection report.� In view of this, I am of the opinion that
this is a fit case to levy a penalty under section 15HB of SEBI Act, 1992.� 4.0.����� CONCLUSION In order to adjudge the quantum of penalty, I have to
consider 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 sections 15 B and 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 |
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