Order against Sunstock Securities Pvt. Ltd In The Scrip Of Sword & Shield Pharma Limited

WTM/TCN/17/ 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 Sunstock Securities Pvt. Ltd.. sub broker affiliated to Birla Sunlife 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. Sunstock Securities Pvt. Ltd., a sub-broker of Birla Sunlife Securities Ltd. was alleged to have traded on behalf of Heena Rajnibhai Patel, Nilesh Patel and Pravin D. 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 clients.

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 Sunstock Securities Pvt. Ltd.  (Sunstock).  On completion of enquiry, the Enquiry Officer submitted his report dated May 27, 2005 recommending no penalty on Sunstock.  

4. In the said report, the Enquiry Officer found that the clients were introducing one another to the brokers. However, on record no data or evidence is available to establish the connection of the clients with Sunstock. Sunstock had executed only 2 trades on behalf of the client which were alleged to be structured. Based on the evidence available on record, the Enquiry Officer concluded there is no evidence that Sunstock violated the provisions of Regulation 4 of FUTP Regulations and failed to exercise due skill, care and diligence as specified under clause A (2) of code of conduct as specified under Schedule II read with Regulation 15 of  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 Sunstock 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 Sunstock 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 Sunstock Securities Pvt. Ltd.