Order against M/s Bhavik Rajesh Khandhar Share & Stock Brokers Pvt. Ltd. member BSE for the dealings in the scrip of Sword and Shield Pharma Ltd

WTM/TCN/  40 / IVD3/ 07 /07

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM : Dr. T.C. NAIR, WHOLE TIME MEMBER

ORDER

Under regulation 13(4) of Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 against M/s Bhavik Rajesh Khandhar Share & Stock Brokers Pvt. Ltd. member BSE  for the dealings in the scrip of Sword and Shield Pharma Ltd.

1. Securities and Exchange Board of India (hereinafter referred to as “SEBI”) had conducted investigation into the affairs relating to the trading of the scrip of Sword and Shield Pharma Ltd. (hereinafter referred to as “SSPL”) subsequent to the unusual increase in the price and volume of the scrip during the period - 3^rd May, 2001 to  6^th July, 2001. It was noticed in the investigation that a group of entities were acting in concert for executing circular and structured trades to affect the price of the scrip.

2. M/s Bhavik Rajesh Khandhar Share & Stock Brokers Pvt. Ltd. (BRK) a member of  Bombay Stock Exchange Ltd. (BSE) was alleged to be involved in the manipulation of the scrip.  It was alleged that Bhavin C Thakkar, sub broker of BRK executed transactions of Smt. Jyotiben M Patel who was stated to be involved in the manipulation of the scrip. BRK was alleged to have aided and abetted the client in the manipulation of the scrip and had failed to exercise due diligence while dealing with the client.

3. In view of the findings of the investigation, an Enquiry Officer was appointed vide Order dated October 14, 2004 to enquire into the alleged violations committed by BRK.  On completion of enquiry, the Enquiry Officer submitted his report dated June 17, 2005 recommending no penalty on BRK.

4. In the said report, the Enquiry Officer found that BRK was alleged to be involved in a series of structured trades and sweeping trades. However from the facts of the case, it was noted that no evidence was available on record which established any other connection between BRK and Jyotiben M. Patel. The trades were executed for the client through its sub broker only. In absence of any such evidence, it cannot be concluded that BRK played a manipulative role in the said transactions. Further it has been observed that BRK had no reason to suspect any wrong doing by its sub broker and therefore  it cannot be concluded that BRK failed to exercise due skill and care. Based on the evidence available on record, the Enquiry Officer concluded that no default had taken place with regard to the trades executed for the client.  In view of the same, it cannot be held that BRK has violated the provisions of Regulation 4 of FUTP and Clauses A(2), A (3) and A (4) of the Code of Conduct for stock brokers as specified in Schedule II under Regulation 7 of the Stock Brokers Regulations.

5. After taking into consideration the facts and circumstances of the case and the findings of the Enquiry Officer mentioned in the report and the relevant provisions of law governing the case, I have come to the conclusion that this matter is not a fit case to levy any penalty as the charges against BRK have not been established with reasonably good evidence. Further, from legal point of view, I feel that there is no evidence on record to prove that BRK failed to exercise due care, skill and diligence in the conduct of its business or has indulged into manipulative role with its clients.

6. Having regard to what has been stated above, I find no reason to differ with the recommendations of the Enquiry Officer. Accordingly, in exercise of the powers conferred upon me in terms of Section 19 of the Securities and Exchange Board of India Act, 1992 read with Regulation 13(4) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002, I hereby dispose of the enquiry proceedings as above against M/s Bhavik Rajesh Khandhar Share & Stock Brokers Pvt. Ltd.