CO/110/ISD/12/2004
SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
UNDER REGULATION 13(4) SEBI (PROCEDURE FOR HOLDING ENQUIRY BY ENQUIRY OFFICER AND IMPOSING PENALTY) REGULATIONS, 2002, IN THE MATTER OF SHRI BALLABH DAS DAGA.
1.0 BACKGROUND
1.1 Ballabh Das Daga ( hereinafter referred to as the Broker) is a member of the Calcutta Stock Exchange ( hereinafter referred to as CSE ) and is registered with the Securities and Exchange Board of India (hereinafter referred to as SEBI ) vide registration no INB030492218.
1.2 An investigation was conducted by SEBI into buying, selling and dealings in the scrip of M P Investment & Consultancy Services Ltd. (MPICS). Investigation, inter alia, revealed that the Broker has contravened the provisions of SEBI Act,1992 , SEBI ( Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 1995 and SEBI ( Stock Brokers and Sub Brokers ) Rules and Regulations, 1992. Pursuant to the findings of the investigation in terms of Regulation 5(1) of SEBI(Procedure for Holding enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to as “the said Regulations”) read with Regulation 13 of SEBI ( Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 [hereinafter referred to as SEBI ( FUTP) Regulations], an Enquiry Officer was appointed vide order dated 21.08.2003 to enquire into the alleged contravention, if any, by the Broker.
2.0 ENQUIRY REPORT AND RECOMMENDATION :
2.1 The enquiry officer, after conducting the enquiry as per the procedure laid down in the said Regulations submitted a report dated 29.06.2004.
2.2 The Enquiry Officer (EO) found that there were many cross deals wherein both the buyer and seller belonged to the Broker and there was complete matching of the order price, quantity and order time. The EO also found that the Broker had undertaken transactions in large scale only with a view to earn brokerage. In the light of the above , EO recommended a minor penalty of the suspension of the certificate of registration of the Broker for a period of one month.
3.0 SHOW-CAUSE NOTICE AND HEARING :
3.1 Pursuant to the above a Show Cause Notice dated 13.07.2004 was issued to the Broker along with a copy of the enquiry report, wherein he was called upon to show cause in terms of Regulation 13(2) of the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 as to why action as considered appropriate should not be taken against him.
4.0 REPLY TO THE SHOW CAUSE NOTICE :
4.1 The broker submitted a reply vide letter dated 11.08.2004 stating that he had already given an undertaking vide his letter dated 11.02.04 that he is only concerned with earning brokerage and he had only executed the buy and sale orders given by his clients. He further stated that he is not very conversant with SEBI’s Guidelines which were violated by him. He also gave an assurance that he will not indulge in the impugned transactions in future and pleaded to reduce the minor penalty of suspension of the certificate of registration for a period of one month to the minor penalty of warning.
5.0 CONSIDERATION OF ISSUES AND FINDINGS :
5.1 I have considered the facts of the case, the findings of the Enquiry Officer, the reply of the Broker to the show cause notice and other material on record.
5.2 I find that between July 2001 and October 2001, the Broker along with other two brokers of CSE generated maximum volumes in the scrip of MPICS. In all, 18,27,060 shares of MPICS were traded at CSE during the said period and the Broker had transacted 4,03,800 shares between settlements number 2002117 to 2002121 and 2002126 constituting 22.10% of the volumes at CSE. During this period the price of the scrip of MPICS declined by 68% from Rs. 45.25 to Rs. 14.30. The details are as under :
|
Settlement
No.
|
Date
|
Buy Qnt.
|
Sale Qnt.
|
Total Qnt.
|
High
(Rs.)
|
Low
(Rs)
|
Avg Price
(Rs)
|
Delivery
|
|
2002115 /CSE
|
02/07/01 -06/07/01
|
78000
|
78000
|
156000
|
44.00
|
40.50
|
42.25
|
0
|
|
2002116 /CSE
|
09/07/01 – 13/07/01
|
41000
|
41000
|
82000
|
45.00
|
44.00
|
44.5
|
0
|
|
2002117 /CSE
|
16/07/01 – 20/07/01
|
106200
|
106200
|
212400
|
46.50
|
44.00
|
45.25
|
0
|
|
2002118 /CSE
|
23/07/01 – 27/07/01
|
125200
|
125200
|
250400
|
45.50
|
40.00
|
42.75
|
0
|
|
2002119 /CSE
|
30/07/01 – 03/08/01
|
71200
|
71200
|
142400
|
43.00
|
43.00
|
43.00
|
0
|
|
2002120 /CSE
|
06/08/01 – 10/08/01
|
53500
|
53500
|
107000
|
43.00
|
39.60
|
41.30
|
0
|
|
2002121 /CSE
|
13/08/01 – 17/08/01
|
237800
|
237800
|
475600
|
42.00
|
33.60
|
37.80
|
0
|
|
2002122 /CSE
|
20/08/01 – 24/08/01
|
85000
|
85000
|
170000
|
41.50
|
36.00
|
38.75
|
0
|
|
2002123 /CSE
|
27/08/01 – 31/08/01
|
3000
|
3000
|
6000
|
34.10
|
31.50
|
32.80
|
0
|
|
2002124 /CSE
|
03/09/01 – 07/09/01
|
110030
|
110030
|
220060
|
36.00
|
33.30
|
34.65
|
0
|
|
2002125 /CSE
|
10/09/01 – 14/09/01
|
300
|
300
|
600
|
31.50
|
29.00
|
30.25
|
0
|
|
2002126 /CSE
|
17/09/01 – 21/09/01
|
300
|
300
|
600
|
27.00
|
25.10
|
26.05
|
0
|
|
2002127 /CSE
|
24/09/01 – 28/09/01
|
400
|
400
|
800
|
23.10
|
21.30
|
22.20
|
0
|
|
2002128 /CSE
|
1/10/01 – 05/10/01
|
600
|
600
|
1200
|
19.60
|
17.10
|
18.35
|
0
|
|
2002129 /CSE
|
08/10/01 – 12/10/01
|
1000
|
1000
|
2000
|
15.80
|
12.80
|
14.30
|
0
|
|
TOTAL
|
|
913530
|
913530
|
1827060
|
|
5.3 I find that most of the transactions were cross deals wherein the ordered quantity, price and time were matched and there was no delivery obligation to the Exchange. The details of such transactions by the Broker is as under:
|
OrderNo
|
OrderDate& Time
|
Qty
|
Price
|
Buy/
Sell
|
TradeNo
|
Trade Time
|
Counter
PartyCode
|
|
31552761
|
7/16/01 2:24 PM
|
7000
|
45
|
S
|
1230
|
2:24:31 PM
|
D0477
|
|
31552764
|
7/16/01 2:24 PM
|
7000
|
45
|
B
|
1230
|
2:24:31 PM
|
D0477
|
|
61394090
|
7/19/01 2:48 PM
|
7200
|
45
|
B
|
1232
|
2:49:07 PM
|
D0477
|
|
61394083
|
7/19/01 2:48 PM
|
7200
|
45
|
S
|
1232
|
2:49:07 PM
|
D0477
|
|
31568687
|
7/25/01 1:50 PM
|
10000
|
45.5
|
B
|
1242
|
1:50:16 PM
|
D0477
|
|
31568674
|
7/25/01 1:48 PM
|
10000
|
45.5
|
S
|
1242
|
1:50:16 PM
|
D0477
|
|
31568675
|
7/25/01 1:49 PM
|
10000
|
45.5
|
S
|
1243
|
1:50:23 PM
|
D0477
|
|
31568688
|
7/25/01 1:50 PM
|
10000
|
45.5
|
B
|
1243
|
1:50:23 PM
|
D0477
|
|
31568690
|
7/25/01 1:50 PM
|
3800
|
45.5
|
B
|
1244
|
1:50:30 PM
|
D0477
|
|
31568678
|
7/25/01 1:49 PM
|
3800
|
45.5
|
S
|
1244
|
1:50:30 PM
|
D0477
|
|
31568690
|
7/25/01 1:50 PM
|
6200
|
45.5
|
B
|
1245
|
1:50:30 PM
|
D0477
|
|
31568680
|
7/25/01 1:49 PM
|
6200
|
45.5
|
S
|
1245
|
1:50:30 PM
|
D0477
|
|
31568680
|
7/25/01 1:49 PM
|
3800
|
45.5
|
S
|
1246
|
1:50:37 PM
|
D0477
|
|
31568692
|
7/25/01 1:50 PM
|
3800
|
45.5
|
B
|
1246
|
1:50:37 PM
|
D0477
|
|
31568692
|
7/25/01 1:50 PM
|
200
|
45.5
|
B
|
1247
|
1:50:37 PM
|
D0477
|
|
31568681
|
7/25/01 1:49 PM
|
200
|
45.5
|
S
|
1247
|
1:50:37 PM
|
D0477
|
|
31568693
|
7/25/01 1:50 PM
|
7800
|
45.5
|
B
|
1248
|
1:50:48 PM
|
D0477
|
|
31568681
|
7/25/01 1:49 PM
|
7800
|
45.5
|
S
|
1248
|
1:50:48 PM
|
D0477
|
|
31568681
|
7/25/01 1:49 PM
|
2000
|
45.5
|
S
|
1249
|
1:50:57 PM
|
D0477
|
|
31568695
|
7/25/01 1:50 PM
|
2000
|
45.5
|
B
|
1249
|
1:50:57 PM
|
D0477
|
|
31568695
|
7/25/01 1:50 PM
|
3800
|
45.5
|
B
|
1250
|
1:50:57 PM
|
D0477
|
|
31568682
|
7/25/01 1:49 PM
|
3800
|
45.5
|
S
|
1250
|
1:50:57 PM
|
D0477
|
|
31568695
|
7/25/01 1:50 PM
|
4200
|
45.5
|
B
|
1251
|
1:50:57 PM
|
D0477
|
|
31568685
|
7/25/01 1:50 PM
|
4200
|
45.5
|
S
|
1251
|
1:50:57 PM
|
D0477
|
|
31568685
|
7/25/01 1:50 PM
|
4200
|
45.5
|
S
|
1252
|
1:51:06 PM
|
D0477
|
|
31568698
|
7/25/01 1:51 PM
|
4200
|
45.5
|
B
|
1252
|
1:51:06 PM
|
D0477
|
|
121083372
|
7/30/01 1:08 PM
|
6100
|
43
|
B
|
1267
|
1:08:03 PM
|
D0477
|
|
121083329
|
7/30/01 1:04 PM
|
6100
|
43
|
S
|
1267
|
1:08:03 PM
|
D0477
|
|
121083336
|
7/30/01 1:04 PM
|
3900
|
43
|
S
|
1268
|
1:08:03 PM
|
D0477
|
|
121083372
|
7/30/01 1:08 PM
|
3900
|
43
|
B
|
1268
|
1:08:03 PM
|
D0477
|
|
121083373
|
7/30/01 1:08 PM
|
2200
|
43
|
B
|
1269
|
1:08:09 PM
|
D0477
|
|
121083336
|
7/30/01 1:04 PM
|
2200
|
43
|
S
|
1269
|
1:08:09 PM
|
D0477
|
|
121083373
|
7/30/01 1:08 PM
|
4900
|
43
|
B
|
1270
|
1:08:09 PM
|
D0477
|
|
121083338
|
7/30/01 1:04 PM
|
4900
|
43
|
S
|
1270
|
1:08:09 PM
|
D0477
|
|
121083358
|
7/30/01 1:06 PM
|
2900
|
43
|
S
|
1271
|
1:08:09 PM
|
D0477
|
|
121083373
|
7/30/01 1:08 PM
|
2900
|
43
|
B
|
1271
|
1:08:09 PM
|
D0477
|
|
121083379
|
7/30/01 1:09 PM
|
4400
|
43
|
B
|
1272
|
1:09:51 PM
|
D0477
|
|
121083358
|
7/30/01 1:06 PM
|
4400
|
43
|
S
|
1272
|
1:09:51 PM
|
D0477
|
|
121083379
|
7/30/01 1:09 PM
|
5600
|
43
|
B
|
1273
|
1:09:51 PM
|
D0477
|
|
121083361
|
7/30/01 1:09 PM
|
5600
|
43
|
S
|
1273
|
1:09:51 PM
|
D0477
|
|
121083361
|
7/30/01 1:09 PM
|
4400
|
43
|
S
|
1274
|
1:09:58 PM
|
D0477
|
|
121083383
|
7/30/01 1:09 PM
|
4400
|
43
|
B
|
1274
|
1:09:58 PM
|
D0477
|
|
121083383
|
7/30/01 1:09 PM
|
300
|
43
|
B
|
1275
|
1:09:58 PM
|
D0477
|
|
121083363
|
7/30/01 1:06 PM
|
300
|
43
|
S
|
1275
|
1:09:58 PM
|
D0477
|
|
121083383
|
7/30/01 1:09 PM
|
5300
|
43
|
B
|
1276
|
1:09:58 PM
|
D0477
|
|
121083365
|
8/6/01 2:42 PM
|
5300
|
43
|
S
|
1276
|
1:09:58 PM
|
D0477
|
|
121083365
|
8/14/01 12:54 PM
|
2000
|
43
|
S
|
1277
|
1:10:23 PM
|
D0477
|
|
121083386
|
7/30/01 1:10 PM
|
2000
|
43
|
B
|
1277
|
1:10:23 PM
|
D0477
|
|
121083386
|
7/30/01 1:10 PM
|
7300
|
43
|
B
|
1278
|
1:10:23 PM
|
D0477
|
|
121083368
|
7/30/01 1:07 PM
|
7300
|
43
|
S
|
1278
|
1:10:23 PM
|
D0477
|
|
121083386
|
7/30/01 1:10 PM
|
700
|
43
|
B
|
1279
|
1:10:23 PM
|
D0477
|
|
121083369
|
7/30/01 1:07 PM
|
700
|
43
|
S
|
1279
|
1:10:23 PM
|
D0477
|
|
121083369
|
7/30/01 1:07 PM
|
3700
|
43
|
S
|
1280
|
1:10:34 PM
|
D0477
|
|
121083388
|
7/30/01 1:10 PM
|
3700
|
43
|
B
|
1280
|
1:10:34 PM
|
D0477
|
|
121083388
|
7/30/01 1:10 PM
|
6300
|
43
|
B
|
1281
|
1:10:34 PM
|
D0477
|
|
121083370
|
7/30/01 1:07 PM
|
6300
|
43
|
S
|
1281
|
1:10:34 PM
|
D0477
|
|
121083391
|
8/17/01 2:16 PM
|
2900
|
43
|
B
|
1282
|
1:10:45 PM
|
D0477
|
|
121083370
|
7/30/01 1:07 PM
|
2900
|
43
|
S
|
1282
|
1:10:45 PM
|
D0477
|
|
181127613
|
8/6/01 2:42 PM
|
3500
|
43
|
S
|
1285
|
2:42:45 PM
|
D0477
|
|
181127614
|
8/6/01 2:42 PM
|
3500
|
43
|
B
|
1285
|
2:42:45 PM
|
D0477
|
|
121096933
|
8/14/01 1:47 PM
|
5500
|
38.5
|
B
|
1396
|
1:47:21 PM
|
D0477
|
|
121096710
|
8/14/01 12:54 PM
|
5500
|
38.5
|
S
|
1396
|
1:47:21 PM
|
D0477
|
|
121097131
|
8/14/01 3:17 PM
|
6800
|
39.2
|
B
|
1397
|
3:17:41 PM
|
D0477
|
|
121097126
|
9/25/01 3:52 PM
|
6800
|
39.2
|
S
|
1397
|
3:17:41 PM
|
D0477
|
|
121097128
|
8/14/01 3:17 PM
|
3200
|
39.2
|
S
|
1398
|
3:17:41 PM
|
D0477
|
|
121097131
|
8/14/01 3:17 PM
|
3200
|
39.2
|
B
|
1398
|
3:17:41 PM
|
D0477
|
|
121097132
|
8/14/01 3:17 PM
|
3600
|
39.2
|
B
|
1399
|
3:17:47 PM
|
D0477
|
|
121097128
|
8/14/01 3:17 PM
|
3600
|
39.2
|
S
|
1399
|
3:17:47 PM
|
D0477
|
|
121097132
|
8/14/01 3:17 PM
|
5400
|
39.2
|
B
|
1400
|
3:17:47 PM
|
D0477
|
|
121097129
|
8/14/01 3:17 PM
|
5400
|
39.2
|
S
|
1400
|
3:17:47 PM
|
D0477
|
|
91347562
|
8/17/01 3:11 PM
|
2500
|
38.5
|
B
|
1463
|
3:11:02 PM
|
D0477
|
|
91347330
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1463
|
3:11:02 PM
|
D0477
|
|
91347562
|
8/17/01 3:11 PM
|
2500
|
38.5
|
B
|
1464
|
3:11:02 PM
|
D0477
|
|
91347332
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1464
|
3:11:02 PM
|
D0477
|
|
91347333
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1465
|
3:11:02 PM
|
D0477
|
|
91347562
|
8/17/01 3:11 PM
|
2500
|
38.5
|
B
|
1465
|
3:11:02 PM
|
D0477
|
|
91347562
|
8/17/01 3:11 PM
|
2500
|
38.5
|
B
|
1466
|
3:11:02 PM
|
D0477
|
|
91347335
|
8/17/01 2:16 PM
|
2500
|
38.5
|
S
|
1466
|
3:11:02 PM
|
D0477
|
|
91347568
|
8/17/01 3:11 PM
|
2500
|
38.5
|
B
|
1467
|
3:11:50 PM
|
D0477
|
|
91347330
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1467
|
3:11:50 PM
|
D0477
|
|
91347332
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1468
|
3:11:50 PM
|
D0477
|
|
91347568
|
8/17/01 3:11 PM
|
2500
|
38.5
|
B
|
1468
|
3:11:50 PM
|
D0477
|
|
91347568
|
8/17/01 3:11 PM
|
2500
|
38.5
|
B
|
1469
|
3:11:50 PM
|
D0477
|
|
91347333
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1469
|
3:11:50 PM
|
D0477
|
|
91347568
|
8/17/01 3:11 PM
|
2500
|
38.5
|
B
|
1470
|
3:11:50 PM
|
D0477
|
|
91347335
|
8/17/01 2:16 PM
|
2500
|
38.5
|
S
|
1470
|
3:11:50 PM
|
D0477
|
|
91347330
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1471
|
3:12:06 PM
|
D0477
|
|
91347569
|
8/17/01 3:12 PM
|
2500
|
38.5
|
B
|
1471
|
3:12:06 PM
|
D0477
|
|
91347569
|
8/17/01 3:12 PM
|
2500
|
38.5
|
B
|
1472
|
3:12:06 PM
|
D0477
|
|
91347332
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1472
|
3:12:06 PM
|
D0477
|
|
91347569
|
8/17/01 3:12 PM
|
2500
|
38.5
|
B
|
1473
|
3:12:06 PM
|
D0477
|
|
91347333
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1473
|
3:12:06 PM
|
D0477
|
|
91347335
|
8/17/01 2:16 PM
|
2500
|
38.5
|
S
|
1474
|
3:12:06 PM
|
D0477
|
|
91347569
|
8/17/01 3:12 PM
|
2500
|
38.5
|
B
|
1474
|
3:12:06 PM
|
D0477
|
|
91347571
|
8/17/01 3:12 PM
|
2500
|
38.5
|
B
|
1475
|
3:12:30 PM
|
D0477
|
|
91347330
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1475
|
3:12:30 PM
|
D0477
|
|
91347571
|
8/17/01 3:12 PM
|
2500
|
38.5
|
B
|
1476
|
3:12:30 PM
|
D0477
|
|
91347332
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1476
|
3:12:30 PM
|
D0477
|
|
91347333
|
8/17/01 2:15 PM
|
2500
|
38.5
|
S
|
1477
|
3:12:30 PM
|
D0477
|
|
91347571
|
8/17/01 3:12 PM
|
2500
|
38.5
|
B
|
1477
|
3:12:30 PM
|
D0477
|
|
91347571
|
8/17/01 3:12 PM
|
2500
|
38.5
|
B
|
1478
|
3:12:30 PM
|
D0477
|
|
91347335
|
8/17/01 2:16 PM
|
2500
|
38.5
|
S
|
1478
|
3:12:30 PM
|
D0477
|
|
210892832
|
9/18/01 1:15 PM
|
200
|
27
|
S
|
1581
|
2:21:04 PM
|
D0778
|
|
121127168
|
9/24/01 3:26 PM
|
200
|
23.1
|
B
|
1583
|
3:26:13 PM
|
D1004
|
|
31661520
|
9/25/01 3:53 PM
|
200
|
21.3
|
S
|
1584
|
3:53:01 PM
|
D0778
|
|
61486722
|
10/1/01 2:25 PM
|
200
|
19.6
|
S
|
1585
|
2:40:16 PM
|
D1004
|
|
31684984
|
10/3/01 2:22 PM
|
200
|
18.1
|
S
|
1586
|
2:31:21 PM
|
D1004
|
|
31696683
|
10/8/01 1:28 PM
|
200
|
15.8
|
S
|
1588
|
1:30:19 PM
|
D1004
|
|
91421508
|
10/9/01 3:26 PM
|
200
|
14.6
|
S
|
1589
|
3:26:10 PM
|
D1004
|
|
31705121
|
10/10/01 2:39 PM
|
200
|
13.6
|
S
|
1590
|
2:39:24 PM
|
D0213
|
5.4 I further find that the time lag between punching of buy and sell orders was under a few minutes/seconds and almost the same in a number of transactions.
5.5 I note that except on 18/9/2001, 24/9/2001, 25/9/2001, 1/10/2001,3/10/2001, 8/10/2001, 9/10/2001 and 10/10/2001 when the trades were settled through delivery in the clearing house of the Exchange, on other occasions all the buy and sell order were matched with no obligation for delivery to the Exchange. Further all the transactions were for a common set of clients.
5.6 I find that the average price of the scrip of MPICS had declined sharply from Rs.45.25 to Rs.14.30, a decrease of more than 68% in settlement No. 2002117 and 2002129. Further, there were no transfer of title in the shares since both the purchase and sell quantities were exactly the same. The value and volume of the impugned transactions were also quite high. The transactions were highly irregular and defeat the purpose of normal order matching mechanism in the price discovery process in the Exchange and hence are violative of Regulation 4 of SEBI ( FUTP ) Regulations, 1995.
5.7 Further the submission of the Broker that he had undertaken the transactions in large scale only with a view to earn brokerage is violative of clause B (4) (a) of the code of conduct for stock brokers as stock brokers should not encourage sales or purchase of securities with the sole object of generating brokerage. Further the statement of the Broker that he is not conversant with SEBI Guidelines can not be taken as an excuse for not complying with the Guidelines. It is well settled proposition that ignorance of law can not be taken as an excuse for non compliance with the same.
6.0 ORDER
6.1 In View of the above and considering the gravity of the charges, a minor
penalty of suspension of the certificate of registration of the Broker for a period of one month would be adequate. Therefore, I , in exercise of the powers conferred upon me in terms of Section 4(3) of the SEBI Act, 1992 read with Regulation 13(4) of SEBI (Procedure for holding Enquiry by Enquiry Officer and Imposing penalty) Regulations, 2002, hereby suspend the certificate of registration of Shri Ballabh Das Daga for a period of one month.
6.2 This order shall come into effect after the expiry of 21 days from the date of this order.
G. N.BAJPAI
CHAIRMAN
SECURITIES AND EXCHANGE BOARD OF INDIA