Order against Ajay Natavarlal Securities Pvt. Ltd in the scrip of Sword and Shield Pharma Ltd

WTM/TCN/15/ IVD/06 /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 Ajay Natavarlal Securities Pvt. Ltd., sub broker of SKSE Securities Ltd. 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. Ajay Natavarlal Securities Pvt. Ltd. (ANSPL) a member of  Saurashtra Kutch Stock Exchange Ltd., Rajkot and also a sub broker of SKSE Securities Ltd., traded on behalf of client, Mega Securities who was stated to be involved in the manipulation of the scrip. It was alleged that ANSPL was a party to the structured and sweeping trades for its client Mega Securities. ANSPL was also 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 ANSPL.  On completion of enquiry, the Enquiry Officer submitted his report dated May 26, 2005   recommending no penalty on subbroker.

4. In the said report, the Enquiry Officer found that the trades were executed for the client as a sub-broker only. No evidence is available which establishes any other connection between ANSPL and Mega Securities. Further as the number of trades alleged to be structured is 9 only and that it is spread over a period of three months, it cannot be concluded that ANSPL failed to exercise due skill and care.  Based on the evidence available on record, the Enquiry Officer concluded that it cannot be held that ANSPL executed structured trades and thereby violated the provisions of Regulation 4 of FUTP and Clauses A(2), D(4) and D(5) of the Code of Conduct for sub brokers as specified in Schedule II under Regulation 15 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 ANSPL 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 ANSPL 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 Ajay Natavarlal Securities Pvt. Ltd.