SECURITIES AND EXCHANGE BOARD OF INDIA
CORAM: DR.T.C.NAIR, WHOLE TIME MEMBER
IN THE MATTER OF
M/S JOSEPH ANTONY &CO., SUB-BROKER,
SEBI REGISTRATION NO. INS 231170213
AFFILIATED TO COCHIN STOCK BROKERS LTD.,
MEMBER, NATIONAL STOCK EXCHANGE
WTM/TCN/MIRSD/ 64/12/06
DATE OF HEARING : May 16, 2006
APPEARANCES :
FOR NOTICEE : Joseph Antony.V, Proprietor
FOR SEBI : Shri P.K.Kuriachen, General Manager
ORDER
UNDER REGULATION 13(4) OF SEBI (PROCEDURE FOR HOLDING ENQUIRY BY ENQUIRY OFFICER AND IMPOSING PENALTY) REGULATIONS, 2002.
1.1 Joseph Antony and Co. (hereinafter referred to as the ‘sub-broker’) is a proprietary concern represented by Shri. Joseph Antony.V having membership of Cochin Stock Exchange bearing SEBI Registration No. INB090277817. The firm also is a Sub-Broker having SEBI Registration No. INS231170213 affiliated to Cochin Stock Brokers Ltd., Member, NSE,
1.2 An Inspection of the Books of Accounts, Documents and other records maintained by the sub-broker during the period 2001-2002, 2002 - April 2003 till the date of inspection i.e. June 3, 2003 was carried out by SEBI. During the inspection, certain irregularities found to have been committed by the sub-broker were observed.
2.1 An Enquiry Officer (hereinafter referred to as “EO”) was appointed vide order dated December 16, 2003 under Regulation 5(1) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred as the ‘said regulations’) to enquire into the alleged irregularities committed by the sub-broker which were observed during the inspection.
2.2 A Show Cause Notice dated July 13, 2004 was issued to the sub-broker under Regulation 6 (1) of the said regulations along with the findings of the inspection report . The sub-broker submitted its reply dated July 22, 2004.
2.3 The sub-broker was granted an opportunity of Personal Hearing on August 30, 2004 vide notice dated August 6, 2004. However, the sub-broker did not appear on the said date and hence the EO conducted the enquiry on the basis of submissions made by the sub-broker vide its letter dated July 22, 2004.
2.4 After considering the reply and the submissions made, the EO submitted her report dated September 29, 2004 recommending minor penalty of suspension of registration of the sub-broker for a period of fifteen days.
3.1 A copy of the Enquiry Report was sent to the sub-broker along with a show cause notice dated October 14, 2004, in terms of Regulation 13(2) of the said Regulations calling upon it to show cause as to why appropriate penalty including the penalty as recommended by the EO should not be imposed on it. Subsequently, a reminder dated November 19, 2004 was also sent to the sub-broker.
3.2 The sub-broker was given an opportunity of personal hearing before me on May 16, 2006 on which date its Proprietor, Shri Joseph Antony V, appeared and made his submissions.
4.1 I have carefully considered the findings of the inspection, enquiry and the submissions made by the sub-broker during the personal hearing and my findings are as under:
4.2 The EO has found that the sub-broker had acted as a sub-broker of another member of an Exchange for carrying out transactions of Mrs. Mariamma Joseph without prior registration from SEBI. The EO further found that the records show that the sub-broker had furnished a detailed declaration at the time of inspection clearly indicating that all his transactions with M/s Share Khan were only for his client Mrs. Mariamma Joseph. In view of this, the EO found that the sub-broker had violated Rule 3 of SEBI (Stock Broker and Sub-Broker ) Rules, 1992 read with Code of Conduct as specified in Schedule II of the SEBI (Stock Broker and Sub-Broker ) Regulations, 1992.
I note from the contract notes annexed to the sub-broker’s reply dated July 22, 2004 that S.S.Kantilal Ishwarlal Securities Pvt. Ltd. (Share Khan) has issued the same directly in the name of Mariamma Joseph clearly indicating that the transactions were done by Mariamma Joseph directly with Share Khan and not through the sub-broker. I note that the sub-broker has only facilitated Mariamma Joseph in maintaining her accounts in the sub-broker’s computer. I further note that Mariamma Joseph is the wife of the sub-broker. I, therefore, do not find the sub-broker guilty of acting as unregistered sub-broker of a member of another exchange.
4.3 The EO found that the sub-broker was required to report all its off-the-floor transactions which were to the tune of Rs.46.08 crores to Cochin Stock Exchange. However, the sub-broker had not reported the same and hence the EO found it guilty of violating SEBI Circular No. SMD/RCG/CIR/(BKG)/293/95 dated March 14, 1995 read with Clause D(1) of Code of Conduct prescribed under Regulation 15 of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992. I note that the sub-broker has stated that it had not done any transaction for any client in Joseph Antony & Co as a sub-broker of Cochin Stock Brokers Ltd. The sub-broker further stated that it was doing business with Geojit and Kotak in its personal name ie. Joseph Antony V. As his was a proprietary concern, the sub-broker entered all transactions (proprietary and otherwise) in the accounts of the firm i.e. Joseph Antony & Co. I further note that as the sub-broker had not done any transactions for clients in the capacity of sub-broker, he had not reported the same to the Cochin Stock Exchange. In support of his contention, the sub-broker has also enclosed copies of contract notes issued in his name. I further note that the sub-broker has stopped trading through Cochin Stock Brokers Ltd. In view of this and as the above circulars are applicable to brokers, I do not find the sub-broker guilty of the violations cited supra as he has indulged only in proprietary trades.
4.4 On a careful consideration of the findings of the EO and the submissions made by Joseph Antony & Co. at the time of hearing before me and in the facts and circumstances of the case, I find that this is not a fit case for imposing any penalty.
5.0 ORDER
5.1 Now, therefore, in exercise of powers conferred upon me in terms of Section 19 of SEBI Act, 1992 read with Regulation 13(4) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulation 2002, I hereby dispose of the matter as above.
5.2 This order will come into force with immediate effect.
| Place: Mumbai |
T.C.NAIR |
| Date: December 06, 2006 |
Whole Time Member |
| |
Securities and Exchange Board of India |