Order against Amrut Securities Ltd in the scrip of Sword and Shield Pharma Ltd

WTM/TCN/16 / 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 Amrut Securities 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. Amrut Securities Ltd., a member of Saurashtra and Kutch Stock Exchange Ltd. and also a sub-broker of SKSE Securities Ltd., was alleged to had executed transactions for Rajesh Modi and Pravin Raiyani who were stated to be involved in the manipulation of the scrip. The sub broker was alleged to have aided and abetted the clients 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 Amrut Securities Ltd. (hereinafter referred to as “sub broker”).  On completion of enquiry, the Enquiry Officer submitted his report dated June 27, 2005 recommending no penalty on the sub broker.

4. In the said report, the Enquiry Officer found that there is no evidence on record indicating that the sub broker was involved in  the transfer of funds or securities. As regards the charge of aiding and abetting the clients to execute synchronised trades, it was stated the sub broker was not aware of the intention of the clients. Further the purpose of executing the trades for the clients was only for earning brokerage only. No evidence is available on record indicating any other relationship of the sub broker with the clients except broker and client relationship. The Enquiry Officer concluded that in absence of evidence, it cannot be concluded that the sub broker played a manipulative role along with the clients and aided and abetted the clients to execute structured deals or revered trades.   

5. After taking into consideration the facts and circumstances of the case, the findings of the Enquiry Officer 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 the sub broker have not been established with reasonably good evidence. Further, from the legal point of view, I feel that there is no evidence on record to prove that the said sub broker 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 the sub broker Amrut Securities Ltd.