Order against Manish A Parekh, Member - BSE

Jyothi Resins & Adhesives Ltd., was listed in BSE, ASE and VSE. The price of the scrip rose from Rs.17.50 to Rs.140 in VSE and in BSE the price rose from Rs.15/- on 22.8.95 to Rs.181.50 on 6.10.95. The substantial jump in the closing price was during the period 18.9.95 to 6.10.95 when it moved from Rs.50.50 to Rs.181.50. The volumes have been steadily hovering around an average of Rs.5 lakh shares per day. There was no positive announcement in respect of the working of the company which could have warranted such huge rise in the price of the scrip after listing. In settlement No.15B of BSE (25.09.95 - 6.10.95) there was a short delivery of 4,51,400 shares. Part of the outstanding position was auctioned and rest was closed out. SEBI in order to prevent the manipulators from getting undue benefits instructed BSE to freeze the proceeds of auction and close-out amounting to Rs.4.18 crore. In the context of these developments and in view of the steep hike in the price of the scrip of Jyoti Resins & Adhesives Ltd., which seems to be artificially created, investigations were initiated by Securities and Exchange Board of India (hereinafter referred to as SEBI) into the affairs relating to buying, selling or dealing in the shares of M/s Jyothi Resins & Adhesives Ltd.

Investigations revealed that Shri Devendra Kantilal Dalal had manipulated the price of the scrip of M/s.Jyoti Resins Ltd. by purchasing and selling in the name of various entities through different brokers. Thus, these entities acting as a front entity of Sh.Dalal. Shri Devendra Kantilal Dalal was a member of ASE and was declared a defaulter by the exchange in August 1989.

It was seen during investigations that Manish A Parekh, Member-ASE, has dealt with 77,900 shares on behalf of Emerging Securities & Investments Pvt Ltd. (ESIPL) and R&D Sons. It was seen that the broker had accepted a draft for Rs.25,00,000 on behalf of ESIPL from third party i.e. Vrushti Financial Services Pvt Ltd. Vrushti Financial Services Pvt Ltd. had also admitted to have dealt on behalf of Sh.D.K.Dalal. Thus, it is alleged that the broker has dealt on behalf of Sh.D.K.Dalal (Sh.Dalal was a member of ASE and was declared a defaulter by the exchange in August 1989); the broker is alleged to have indulged to have carried out transactions for Sri Dalal, a defaulted member of ASE who manipulated the prices of the scrip of Jyoti Resins.

On completion of the investigations, an Enquiry Officer was appointed by SEBI vide order dated 5^th May 1997 under Regulation 28 of SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 to enquire into the prima facie violations committed by the broker.

The Enquiry Officer, thereafter, proceeded with the enquiry and issued a Show Cause Notice to the broker vide letter dated 28^th November 1997 alleging that Manish A Parekh., Member, BSE, had indulged in carrying out deceptive transactions by not

disclosing Sh.Dalal as the client and had abetted the market manipulators. Thus, it was alleged that the broker has violated Regulation 7 of SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 for not abiding by the code of conduct specified in Schedule 2 of that Regulations. The broker replied to the Show Cause Notice vide letter 13^th January 1998. Opportunities of personal hearing was also given by the Enquiry Officer on 28^th January 1998 which was duly attended by Sh.Manish A Parekh, Director of the Broker company. The broker made further submissions vide letter dt. 2^nd February 1998.

The Enquiry Officer concluded that had the broker been alert he would have detected that manipulation was being done by his clients. Thus, there was a case of negligence on the part of the broker. Moreover, the broker was declared a Defaulter on 13^th May 1999 and the rights of the broker was auctioned on 22^nd July 2000. The Enquiry Officer, therefore, has recommended that the membership be cancelled if not cancelled already.

Pursuant to the submission of Enquiry Report, a Show Cause Notice dated 25^th July 2001, under Regulation 29(1) of SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 was issued enclosing a copy of the Enquiry Report. No reply was received from the member. An opportunity of personal hearing before Chairman SEBI was given to the member on 20^th June 2002. However, no body attended the hearing before the Chairman, SEBI. Since I find that enough opportunities have been given to the member to present its case, no further opportunity of personal hearing before me needs to be given. I decide to proceed on the basis of the facts available on record.

I have carefully examined the enquiry report, submissions made orally as well as in writing by the member, other material on record etc. I find that Manish A Parekh had dealt with two clients viz. Emerging Securities and Investments Pvt Ltd. and R&D sons who were acting as fronts for Sh.D.K.Dalal. It was also noticed that the broker had also accepted a draft for Rs.25,00,000 on behalf of ESIPL from a third party i.e. Vrushti Financial - another front of Sh.D.K.Dalal. Thus, I find that had the broker been alert he could have noticed that his clients were manipulating the price of the scrip of Jyoti Resins. It is not expected from a reasonable and prudent broker to deal for some one and show the transactions in some other name.

I also find that the broker was declared a defaulter on 13^th May 1999 and the membership right was auctioned on 22^nd July 2001. In other words Manish A Parekh is no more a broker of the exchange and therefore cannot continue to be registered with SEBI, In the light of above, I therefore, direct that the membership rights of Manish A Parekh be cancelled with immediate effect.

Dated this ___ 2002

Place G.N.BAJPAI

Date CHAIRMAN

SECURITIES AND EXCHANGE BOARD OF INDIA