Order against M/S. Ramakrishna Sekhsaria

MO/98/IVD/01/06

SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI

ORDER 

Whereas, an investigation was conducted into the unusual price movement in the scrip of Kreb Biochemicals Limited (hereinafter referred to as KBL) during 1998 and it was brought out that the price of the scrip went up from Rs. 81/- per share in March 1998 to a high of Rs. 304/- per share on 02.06.98, and,

whereas, three entities CDP Fincap, Damayanti Finvest and Rituja Finvest had enrolled as common clients to some members of The Stock Exchange, Mumbai (hereinafter referred to as BSE) and The National Stock Exchange (hereinafter referred to as NSE) and had traded in the scrip of KBL. The said three entities were related and were acting in concert with one another. Their trading pattern predominantly moved the scrip price artificially during the period of investigation, and,

whereas, Damayanti Finvest had transacted in the scrip of KBL through Ramakrishna Sekhsaria, Member, The Stock Exchange, Mumbai, (hereinafter referred to as ‘the member’) and,

whereas, an enquiry officer was appointed vide an order dated 29.05.03 to inquire into the role of the member for his dealings in the scrip of KBL for its client Damayanti Finvest and to inquire into the violation of the provisions of Clause A (2) of the Code of Conduct for Stock Brokers prescribed in Schedule II of Regulation 7 of SEBI (Stock Brokers and Sub-brokers) Regulations, 1992, and,

whereas, the enquiry officer after inquiring into the violations of the member had submitted a report dated 08.06.04, recommending that a warning be issued to the member, since the allegations made against the member have not been proved to an extent that, the member deserves to be punished by way of suspension or cancellation, and,

whereas, a show cause notice dated 14.06.04 was issued to the member annexing a copy of the enquiry report asking it to reply within 15 days or else it would be presumed that the member had no explanation to offer and SEBI would be free to take such action as it deems fit, and,

whereas, a reply dated 28.06.04 was received from the member stating that the enquiry officer has found no violation on their part. Therefore, the member requested that the proceedings against it be dropped, and,

whereas, the issue for consideration is whether the member is guilty of violating the provisions of the provisions of Clause A (2) of the Code of Conduct for Stock Brokers prescribed in Schedule II of Regulation 7 of SEBI (Stock Brokers and Sub-brokers) Regulations, 1992, by virtue of his carrying out the deals for his client CDP Fincap.

I have considered the enquiry report dated 08.06.04 and the reply of the member to the findings in the enquiry report.

I have noted that certificate of registration of the member has been suspended for a period of three months for executing transactions similar to that of KBL in the scrip of BPL Industries, Videocon and Sterlite. A comparison of the transactions in the scrip of KBL and BPL is detailed in the table below:

I have also taken into consideration the fact that the enquiry officer has found the member guilty of violating the provision of Code of Conduct as laid down in the Broker Regulations and the enquiry officer had recommended a penalty of warning to be issued to M/s Ramakrishna Sekhsaria, Member.

After considering the facts and circumstances of the case and keeping in view the submissions of the member, I am inclined to agree with the recommendation of the enquiry officer that a warning needs to be issued to the member for the transactions in the scrip of KBL for its clients Damayanti Finvest.

Therefore, in exercise of powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with regulations 13(4) and 13(6) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002, I hereby direct M/s. Ramakrishna Sekhsaria, member, The Stock Exchange, Mumbai (SEBI Registration No. INB 010579215) to be careful in the future not to carry on activities of the nature carried out in the scrip of Kreb Biochemicals Limited.