SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
Under Regulation 13(4) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002, against M/s. Magma Securities Ltd., sub-broker, SEBI Registration No. INS231096731, Affiliated to OTCEI Securities Ltd., Member-NSE
Whereas, Securities and Exchange Board of India ( hereinafter referred to as SEBI ) conducted an inspection of the books of accounts and other documents of M/s. Magma Securities Ltd., a sub-broker, affiliated to OTCEI Securities Ltd., Member-NSE (hereinafter referred to as “sub-broker”) into the alleged violations of provisions of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”), Rules, Regulations and Circulars made there under. The inspection revealed various irregularities and violations to have been committed by the sub broker including those of non segregation of client funds from its own funds and instance of trade transfer; and
Whereas vide order dated January 08, 2004 an Enquiry Officer was thus appointed by SEBI under Regulation 5 of SEBI (Procedure for holding enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to as “Enquiry Regulations”) to enquire into the alleged contravention of SEBI Act, Securities Contract (Regulation) Rules, 1957, SEBI (Stock Brokers & Sub-Brokers) Regulations, 1992 (hereinafter referred to as “Broker Regulations”), SEBI (Stock Brokers & Sub-Brokers) Rules, 1992 (hereinafter referred to as “Broker Rules”), SEBI Circulars, and,
whereas, the Enquiry Officer after conducting the enquiry in terms of the Enquiry Regulations and while finding that in the facts and circumstances of the case and the reply of the sub broker, albeit the other charges against the sub broker can not sustain, concluded that the sub broker by not segregating client funds from its own funds is guilty of violating the provisions of SEBI Circular No. SMD / SED / CIR / 93 / 23321 dated November 18, 1993; and
whereas the Enquiry Officer further observed that the sub broker by undertaking fund based trading is guilty of violation of code of conduct prescribed under Schedule II of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 by violating Rule 8(1) (f) of Securities Contract (Regulation) Rules, 1957 and recommended a minor penalty of censure against sub broker vide his Enquiry Report dated October 25, 2004; and
whereas, a copy of the said Enquiry Report was forwarded to the sub broker along with a show cause notice dated October 28, 2004 advising it to show cause as to why appropriate penalty including penalty as recommended by the Enquiry Officer should not be imposed on it ; and
whereas, the sub broker replied to the said show cause notice vide its letter dated November 08, 2004 saying that its submissions already made before the Enquiry Officer and / or submissions made in response to earlier correspondences with SEBI may be taken into account; and
whereas, the sub-broker also requested for reconsideration of the matter and requested for dropping of the penalty by taking a lenient view in the matter; and
whereas, it is observed that the enquiry officer having considered the detailed submissions made before him, has recommended the minor penalty of censure against the sub broker and that the sub-broker did not make any new submission pursuant to the show cause notice dated October 28, 2004.
Now, therefore,
I, having considered the nature and gravity of the charges established, the facts and circumstances of the case, the recommendations of the Enquiry Officer, the submissions made by the broker thereto, and the mitigating factors as explained above, while agreeing with the findings of the Enquiry Officer, in exercise of powers conferred under Section 19 of the SEBI Act , read with Regulation 13(4) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulation 2002, hereby censure M/s. Magma Securities Ltd., a sub-broker bearing registration No. INS231096731, affiliated to OTCEI Securities Ltd., member-NSE and advise it to be careful in future in its dealings in the securities market and diligently adhere to the provisions of the SEBI Act,1992, the Regulations and Circulars made there under.
DATE : 30/12/2005
PLACE: MUMBAI
MADHUKAR
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA