SECURITIES AND EXCHANGE BOARD OF INDIA
DIRECTION UNDER 11B OF SEBI ACT, 1992 READ WITH REGULATION 12 OF SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) REGULATIONS, 1995 AGAINST SHRI FAKRUDDIN MOIYADI PROPRIETOR AND M/S F T TRADERS.
CO/ 454/IES/01/2003
1.1 Investigations were conducted in the scrip of M/s Morepen Hotels Ltd. (hereinafter referred to as MHL) by SEBI following a major spurt in the total volume and price of the scrip. From 29,400 shares during January 2000 including nil volume for the entire month of July 2000, it shot up to 11,34,200 shares during the period August to November. Further, the percentage of net quantity delivered to gross quantity traded during the period September 11 to November 17,2000 was less than 1% of the total traded volume on the Exchange. Although the brokers of BSE and NSE generated volumes in lakhs, their net delivery obligations in the scrip was however in the range of 100 to 200 shares. The price of the scrip also had gone up to a 52 week high at Rs.285/- on September 11, 2000 which was followed by a fall in price of 52 week low at Rs.154.65 on November 15, 2000.
1.2 Investigations revealed that Shri Fakrudin Moiyadi/ M/s F T Traders had transacted in the scrip of MHL with an intention of artificially raising the price of the scrip and also for building artificial volumes in collusion with certain entities connected with it. It was also revealed during the investigation that Shri Fakrudin Moiyadi/ M/s F T Traders had acted in concert through a selected cartel of brokers of BSE and NSE and were involved in circular trading in the scrip which had pushed up the volumes to artificial levels at both NSE and BSE during the period from June 2000 to December 2000.
1.3 Investigations disclosed that Shri Fakrudin Moiyadi/ M/s F T Traders had been responsible in artificially raising price of the scrip of MHL, having entered into purchase and sale of securities without intending to transfer the beneficial ownership and also for the purpose of creating a false / artificial market for the scrip.
1.4 Shri Fakrudin Moiyadi/ M/s F T Traders have been found to be acting in concert with other clients for a common purpose and objective for manipulation of scrip of MHL. From the investigation, it was also found that Shri Fakrudin Moiyadi/ M/s F T Traders had violated the provisions of Regulation 4(b) and 4(d) of SEBI (FUTP) Regulations, 1995. It was also observed that Shri Fakrudin Moiyadi/ M/s F T Traders had traded heavily in another scrip, Eonour Software Ltd. which was also investigated by SEBI for price manipulation and was revealed that Shri Fakrudin Moiyadi/ M/s F T Traders along with other clients was responsible for the price manipulation of Eonour Software Ltd. also
2.1 A show cause notice dated 14.06.2002 was issued to Shri Fakrudin Moiyadi/ M/s F T Traders asking them to show cause as to why suitable directions including such directions debarring / prohibiting Shri Fakrudin Moiyadi/ M/s F T Traders from dealings in securities market for a suitable period should not be issued under Section 11B of the SEBI Act, read with Regulations 11 and 12 of SEBI (FUTP) Regulations, 1995. They were also asked to submit their reply supported by necessary records / evidences which they like to adduce in their support within 21 days from the date of receipt of the notice failing which it was said that SEBI shall presume that they had no explanation to offer and would be constrained to pass appropriate orders. No reply has been furnished till date by Shri Fakrudin Moiyadi / M/s.F T Traders.
3.1 Subsequently, an opportunity of hearing was granted on 28.10.2002 which was communicated to M/s F T Traders vide letter dated 01.10.2002. No one represented M/ s F T Traders in the scheduled hearing.
3.2 I have carefully considered the findings of the investigation. I find that M/s. F. T. Traders is a proprietary concern of Shri Fakruddin Moiyadi residing at D-2/22, Shanti Niketan, 3rd Floor, LBS Marg, Ghatkopar (West), Mumbai 400 086 and is found to have been engaged in the trading of securities since April 2000. The dealings of M/s. F. T. Traders in the scrip of Morepen Hotels Ltd. with different brokers are given as under:
|
Name of the Broker
|
Sett No.
|
Purchases
|
Sales
|
Gross
|
Net
|
|
Shreepati Holding & Finance Pvt. Ltd.
|
44
|
3,600
|
3,600
|
7,200
|
0
|
|
Member NSE
|
45
|
8,600
|
8,600
|
17,200
|
0
|
|
|
46
|
18,100
|
18,100
|
36,200
|
0
|
|
|
47
|
18,100
|
18,100
|
36,200
|
0
|
|
|
48
|
19,800
|
19,800
|
39,600
|
0
|
|
|
49
|
20,200
|
20,200
|
40,400
|
0
|
|
|
50
|
21,100
|
21,100
|
42,200
|
0
|
|
|
51
|
21,600
|
21,600
|
43,200
|
0
|
|
|
52
|
20,500
|
20,500
|
32,800
|
0
|
|
|
53
|
6,800
|
7,800
|
36,500
|
500
|
|
Total
|
|
1,58,400
|
1,59,400
|
3,31,500
|
500
|
|
Anantrai A Parekh
|
23
|
8,700
|
8,700
|
17,400
|
0
|
|
Member BSE
|
24
|
5,500
|
5,500
|
11,000
|
0
|
|
|
25
|
11,600
|
11,600
|
23,200
|
0
|
|
|
26
|
11,600
|
11,600
|
23,200
|
0
|
|
|
27
|
8,700
|
8,700
|
17,400
|
0
|
|
Total
|
|
46,100
|
46,100
|
92,200
|
0
|
|
Shivam Investments
|
35
|
4,100
|
4,100
|
8,200
|
0
|
|
SB to Joindre
|
36
|
10,800
|
10,800
|
21,600
|
0
|
|
|
37
|
20,000
|
20,000
|
40,000
|
0
|
|
|
38
|
14,800
|
14,800
|
29,600
|
0
|
|
|
39
|
17,400
|
17,400
|
34,800
|
0
|
|
|
40
|
10,000
|
10,000
|
20,000
|
0
|
|
Total
|
|
77,100
|
77,100
|
1,54,200
|
0
|
|
Ceekay Holdings P Ltd.
|
37
|
24,500
|
24,500
|
49,000
|
0
|
|
Member NSE
|
38
|
8,100
|
8,100
|
16,200
|
0
|
|
|
39
|
6,700
|
6,700
|
13,400
|
0
|
|
|
40
|
4,700
|
4,700
|
9,400
|
0
|
|
|
41
|
5,500
|
5,500
|
11,000
|
0
|
|
|
42
|
9,400
|
9,200
|
18,600
|
200
|
|
|
43
|
11,600
|
11,200
|
22,800
|
400
|
|
|
44
|
5,200
|
5,400
|
10,600
|
-200
|
|
|
45
|
7,700
|
7,800
|
15,500
|
-100
|
|
|
46
|
15,200
|
15,500
|
30,700
|
-300
|
|
|
47
|
11,400
|
11,100
|
22,500
|
300
|
|
|
48
|
9,800
|
10,800
|
20,600
|
-1000
|
|
|
49
|
12,600
|
12,000
|
24,600
|
600
|
|
|
50
|
10,800
|
10,500
|
21,300
|
300
|
|
|
51
|
11,400
|
11,900
|
23,300
|
-500
|
|
|
52
|
10,200
|
9,700
|
19,900
|
500
|
|
|
53
|
11,300
|
11,800
|
23,100
|
-500
|
|
Total
|
|
1,76,100
|
1,76,400
|
3,52,500
|
-300
|
|
Dinesh J Shah
|
22
|
2,100
|
2,000
|
4,100
|
100
|
|
Member BSE
|
23
|
8,600
|
8,600
|
17,200
|
0
|
|
|
24
|
13,200
|
13,200
|
26,400
|
0
|
|
|
25
|
14,100
|
14,100
|
28,200
|
0
|
|
|
26
|
12,900
|
12,900
|
25,800
|
0
|
|
|
27
|
5,800
|
5,800
|
11,600
|
0
|
|
Total
|
|
56,700
|
56,600
|
1,13,300
|
100
|
|
Bhupendra M Bheda
|
22
|
3,000
|
3,000
|
6,000
|
0
|
|
Member BSE
|
23
|
11,900
|
11,900
|
23,800
|
0
|
|
|
24
|
19,000
|
19,000
|
38,000
|
0
|
|
|
25
|
15,500
|
15,500
|
31,000
|
0
|
|
|
26
|
14,600
|
14,600
|
29,200
|
0
|
|
|
27
|
17,000
|
17,000
|
34,000
|
0
|
|
|
28
|
13,800
|
13,800
|
27,600
|
0
|
|
|
29
|
19,200
|
19,200
|
38,400
|
0
|
|
|
30
|
21,900
|
21,900
|
43,800
|
0
|
|
|
31
|
11,600
|
11,100
|
22,700
|
500
|
|
|
32
|
8,100
|
6,000
|
14,100
|
2,100
|
|
|
33
|
22,300
|
22,100
|
44,400
|
200
|
|
|
34
|
23,400
|
23,400
|
46,800
|
0
|
|
|
35
|
22,900
|
23,500
|
46,400
|
-600
|
|
|
36
|
24,200
|
24,400
|
48,600
|
-200
|
|
|
37
|
21,400
|
21,900
|
43,300
|
-500
|
|
|
38
|
19,500
|
19,000
|
38,500
|
500
|
|
|
39
|
22,500
|
22,500
|
45,000
|
0
|
|
|
40
|
21,000
|
20,700
|
41,700
|
300
|
|
Total
|
|
3,32,800
|
3,30,500
|
6,63,300
|
2,300
|
|
Grant Total
|
|
8,54,800
|
8,52,200
|
17,07,000
|
2,600
|
3.3 Shri Fakrudin Moiyadi/ M/s F T Traders was found to have stated during investigation that he had known most of the brokers. It is also noted that he had not paid margins to any of the brokers although they had traded substantially in the scrip. The reason given by M/s F T Traders for trading in the scrip with many brokers/sub-brokers at the same time was that since most of the brokers were his friends he was trading with all the brokers at the same point of time and there was no specific reason for trading in the scrip with many brokers.
3.4 Regarding the reasons for trading in the scrip of MHL, it was said by Shri Fakrudin Moiyadi/ M/s F T Traders that in his opinion the scrip was not illiquid and were traded regularly on the exchanges during the period of investigations. Again, he had said that there were rumors that these scrips were good for trading. The reasons for his frequent cash deposit in the bank account was stated to be that since his retirement from the services in 1992, he had sold some of his property at his native place and had deposited the cash with the bank which was received from sale of property.
3.5 As regards the fact that Jem Fiscal Ltd., Prashant Investment, K. N. Traders, Hakeem Auto etc. having the same correspondence address as that of M/s F T Traders, Shri Fakruddin Moiyadi stated that he had not known any of these entities and therefore it should not be construed that he has acted in concert with these clients. However, it is observed from the records submitted by the brokers that F. T. Traders had given its address as 28, Great Western Building, S. B. Marg, Mumbai as the correspondence address (i.e. the address of Jem Fiscal Ltd.) and had also taken BOLT terminal from Bhupendra M. Bheda, Member BSE, located at the same place. Further, it was also observed that Shri Nazir Hakeem of M/s. Hakeem Auto Ltd. who is also Managing Director of M/s. Jem Fiscal Ltd. had introduced the bank account of M/s. F. T. Traders maintained with United Bank of India., Share market Branch, Mumbai. The above clearly indicates the connection of Shri Nazir Hakeem /Jem Fiscal/Hakeem Auto with the proprietor of FT Traders.
Further, instead of genuinely investing in the scrip by taking delivery, he was merely creating artificial volumes. It is also observed that he had deposited huge cash in his bank account to pay the brokers. The explanation given by the proprietor of FT Traders that he had retired in 1992 and had sold his property is not convincing as the cash amount was deposited with the bank only when he had needed money to pay the brokers. Had he sold his property even by accepting cash as a consideration, he would have deposited the whole amount on a particular date and not at the time of different settlements when he had to pay the brokers. In all probability the money would have come from Jem Fiscal Ltd./Hakeem Auto Ltd. outside the scope of the books. From the trading details, it is also clear that more than 20% of the trading volume at both the exchanges taken together were contributed by M/s F T Traders without taking/giving any significant delivery.
It is also seen that FT Traders was related to other clients dealing in the scrip, which is evident from the details mentioned above.
|
Name of the client
|
Relationship/Link with other clients
|
|
Jem Fiscal Ltd.
|
a) They are/were employer of Ketan Shah (K. N. traders), Prashant Shah (Prashant Investment), Kisan Parwad (K. P. Investment), Shamshad Sheikh (S. M. Investment), Narendra Navale (N. N. Investment).
|
|
|
b) The Director of the firm, Shri Nazir Hakeem is also a Director with Hakeem Auto Ltd.
|
|
|
c) Shri Nazir Hakeem introduced the bank a/c of F. T. Traders ( Prop. Fakruddin Moyiandi) with United Bank of India, Fort Branch.
|
|
|
d) Shri Prashant Shah ( Prashant Investments)placed orders on behalf of Jem Fiscal with Toss Financial Services, member NSE and Varun Stock Brokers, (Sub-broker to Suresh Rathi Securities)
|
|
Hakeem Auto Ltd.
|
a) The Director, Shri Nazir Hakeem is also a director of Jem Fiscal Ltd.
|
|
|
b) Introduced the bank account of F. T. Traders with United Bank of India.
|
|
N. N. Investment
|
a) The proprietor of the firm, Shri Narendra Navale, is an employee of Jem Fiscal Ltd.
|
|
|
b) He stated that he has traded on the recommendation of his employer’s website.
|
|
|
c) Shri Prashant Shah (Prop: Prashant Investment), who also in employment with Jem Fiscal Ltd. placed the orders on behalf of N. N. Investment with Toss Financial, member NSE.
|
|
S. M. Investment
|
a) The proprietor, Shri Shamshad Sheikh, is an employee of Jem Fiscal Ltd.
|
|
|
b) The account of the firm with United Bank of India was introduced by Shri Fakruddin Moiyaddi of F. T. Traders.
|
|
|
c) He had traded in the scrip because his employer, M/s. Jem Fiscal Ltd. was also trading in the scrip.
|
|
K. N. Traders
|
a) The proprietor, Shri Ketan Shah was employed with Jem Fiscal Ltd. as Manager (Reseach).
|
|
|
b) As per information provided by Shilpa Stock Brokers, he was trading on the terminal provided to Hakeem Auto Ltd.
|
|
|
c) He had given recommendation on the web site of Jem Fiscal Ltd.
|
|
|
d) He had also recommended the scrip for trading to Prashant Shah (Prashant Investment)
|
|
Prashant Investment
|
a) The proprietor, Shri Prashant Shah, is an employee of Jem Fiscal Ltd.
|
|
|
b) He had traded in the scrip based on the recommendation on the website of his employer.
|
|
|
c) Had discussed the matter with Ketan Shah (K. N. Traders) before he started trading in the scrip
|
|
|
d) He had placed orders for Jem Fiscal Ltd. with Varun Stock Brokers (Suresh Rathi Securities Pvt. Ltd.)
|
|
|
e) He had also placed orders for Jem Fiscal Ltd. with Toss Financial, Member NSE.
|
|
|
f) He had placed orders for N. N. Investment with Toss Financial, member NSE.
|
|
K. P. Investment
|
a) He is employed with Jem Fiscal Ltd.
|
|
|
b) Has traded mainly because his employer, Jem Fiscal Ltd. was also trading/investing in the scrip.
|
|
F. T. Traders
|
a) Shri Fakruddin Moiyadi, Prop. F. T. Traders, had given the office address of Jem Fiscal Ltd. as his correspondence address.
|
|
|
b) The BOLT terminal provided by Bhupendra M. Bheda to F. T. Traders was installed at the office address of Jem Fiscal Ltd.
|
|
|
c) The account of F. T. Traders with United Bank of India, Fort Branch was introduced by Shri Nazir Hakeem, who is a Director of Jem Fiscal Ltd. and Hakeem Auto Ltd.
|
|
|
d) Shri Fakruddin Moiyadi had introduced the account of S. M. Investment (Proprietor: Shri Shamshad Sheikh, an employee of Jem Fiscal Ltd.) with United Bank of India.
|
4.2 The other indicators showing the connections of the clients are as under:
¨ FT Traders ( Shri Fakruddin Moiyandi) had dealt through three members of BSE simultaneously viz. Bhupendra Bheda, Dinesh J Shah and Anantrai A Parekh
¨ Jem Fiscal Ltd dealt through two members of BSE simultaneously namely, Suresh Rathi Securities and GSB Capital Markets
¨ Prasanth Investments ( Prasanth Shah) and KP Investments (Kisan Parwad) have dealt in the scrip of MHL simultaneously through two BSE members viz. Joinder Capital and MJ Doshi.
¨ Hakeem Auto shared the same address as that of FT Traders and KN Traders
¨ Both FT Traders and KN Traders have accounts with United Bank of India and their account nos were close to each other i.e. 4664 and 4667.
¨ The fax no. 2818179 given by Prasanth investments ( Prasanth Shah) is the same as that of Hakeem Auto and KN Traders.
¨ The telephone nos. provided by FT Traders in the client registration form to BSE member M/s DJ Shah were in the name of Smt. Hakeem Zohra who is one of the directors of Jem Fiscal Ltd.
¨ The telephone numbers provided by KP investments and Prasanth Investments in their client forms were matching with the telephone nos of Hakeem Zohra who is a director of Jem Fiscals Ltd.
¨ Both Narendra Navale of NN Investments and Kisan Parwad of KN Traders shared the same address viz. Ganesh Nagar, Pump House, Andheri East.
4.3 It is found that the above mentioned clients had traded in the scrip in a manner which was “Circular in Nature”. It is also noted that the client had lied under oath that he did not know any of the entities having 28, Great Western Building, S. B. Marg, Mumbai as their office address when he had traded from this address.
4.4 It is thus found that, Shri Fakrudin Moiyadi and the firm M/s F T Traders had been related to other clients dealing in the scrip, which is evident from the details mentioned above and had traded in the scrip in a manner which was “Circular in Nature”. It is evident from the transactions undertaken by Shri Fakrudin Moiyadi and the firm M/s F T Traders through various brokers in the same scrips the purpose of its dealing was not to transfer the beneficial ownership but for creating false and misleading appearance of trading in the securities market. Shri Fakrudin Moiyadi and the firm M/s F T Traders are therefore guilty of Violating the Provisions of Regulation 4 (b) and 4 (d) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market), Regulations, 1995.
4.5 Therefore, in exercise of the power conferred upon me under Section 4(3) of SEBI Act, 1992 read with Section 11B and Regulation 11 and12 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices in Securities Market) Regulations, 1995, I hereby prohibit Shri Fakrudin Moiyadi and the firm M/s F T Traders from dealing in securities for a period of two years. This order shall come into force with immediate effect.
Place : Mumbai
G. N. Bajpai
Date : January 08, 2003
Chairman
Securities & Exchange Board of India