ORDER
UNDER RULE 5(1) OF THE SEBI (PROCEDURE FOR HOLDING ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING OFFICER) RULES, 1995
READ WITH SECTION 15A OF THE SEBI ACT, 1992.
AGAINST
M/s J M MORGAN STANLEY SECURITIES PVT.LTD
1. M/s J M Morgan Stanley Securities Private Ltd (for brevity’s sake, hereinafter referred to as Morgan) is registered with the Securities and Exchange Board of India (for brevity’s sake, hereinafter referred to as the SEBI) as a broker with the National Stock Exchange and the Stock Exchange, Mumbai with Registration Nos. INB231054231 (NSE) and INB 011054237 (BSE) respectively.
2. There was a steep fall in the Indian stock market on May 17, 2004 (Sensex fell by 567.74 points, the Nifty fell by 196.90 points while the intraday Sensex fell by 842 points) that was unprecedented in recent times such that it even resulted in temporary stoppage of trading twice on both the BSE and NSE during the day. In view of the same, the SEBI examined the dealings in securities of various entities on the said day. In the course of the said investigation, during the course of the investigation, it was inter alia found that Morgan Stanley and Company International Limited, a registered FII with SEBI, through its registered sub-account had allegedly sold Rs.122 crores and purchased Rs.73 crores i.e. a net of Rs.49 crores in the cash segment alone. In the F&C segment, Morgan Stanley and Company International Limited had allegedly built a short position in the Nifty May Futures and Stock Futures during the period from May 10-14, 2004 to the extent of about 730 crores. In all these dealings, Morgan Stanley and Company International Limited were found to have dealt through Morgan, their Indian broking entity. Consequently SEBI called for the related information from Morgan in this regard. However as Morgan allegedly failed to furnish the necessary information called for by SEBI, they were held to have contravened the provisions of Regulation 26 (ii) of the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 (Broker Regulations) thereby making them liable for action under Section 15A of the SEBI Act, 1992 (the Act) read with Regulation 25 (1) of the Broker Regulations.
3. In view of the same, adjudication proceedings were initiated against Morgan and in this context, I was appointed as the Adjudicating Officer, vide order dated January 12, 2005 to enquire into and adjudge under Section 15A of the Act read with Regulation 25 (1) of the Broker Regulations, the alleged contravention by Morgan of Regulation 26 (ii) of the Broker Regulations.
NOTICE/ REPLY/ PERSONAL HEARING:
4. A notice dated June 9, 2005 was issued to Morgan in terms of Rule 4 of the SEBI (Procedure for holding enquiry and imposing penalty by the Adjudicating Officer) Rules, 1995 (Rules) where under they were asked to show cause as to why enquiry proceedings should not initiated against them for the violations referred to in the said notice. Morgan were also advised to make their submissions, if any, along with supporting documents that they wished to rely upon, within 14 days from the date of the receipt of the notice, and also indicate whether they were desirous of a personal hearing. Morgan were further advised to note that in case they failed to reply within the stipulated period, it would be presumed that they had no adequate explanation to offer and that the matter would be decided solely on the basis of the material available on record.
5. Morgan replied to the said notice vide their letter dated June 24, 2005 in which they refuted all the allegations leveled against them. Thereafter, a notice of hearing dated June 27, 2005 was issued to them to appear before me on July 6, 2005. In view of an adjournment sought for by Morgan, the case for posted for hearing on August 3, 2005 which once again on their request was rescheduled to August 23, 2005. On the said date, the officials of Morgan along with their Counsel appeared before me and while reiterating the contentions made therein, requested that the same be taken into consideration along with the documentary evidence submitted in support thereof. Additional submissions were later forwarded vide their letter dated August 30, 2005.
6. The submissions made by Morgan through the above cited letters are detailed below:-
I. Morgan Stanley & Co. International are a Foreign Institutional Investor (“FII”) registered with the SEBI.
II. Following the stock market event on May 17, 2004, SEBI had initiated an investigation and requested through email dated October 05, 2004, the copies of the recordings or transcripts of the telephone conversations of the dealing room of Morgan on May 14, 2004 and May 17, 2004 (the “Telephone Recording”).
III. Morgan responded to the SEBI request on October 07, 2004 by stating that pursuant to the Telephone Recording Policy (the “policy”), Morgan retained recordings of telephone conversations of its dealing room phones only for 30 days and as this 30 day retention period had expired much before the receipt of the SEBI request, they were unable to furnish copies of the Telephone Recordings.
IV. Under the policy, the telephone conversations of sales and trading staff of Morgan as well as operations staff who are responsible for confirming deals or passing payment and other settlement instructions were recorded which had been used in the past, to resolve queries and trade disputes with clients.
V. As queries and disputes normally arose within a short period of time after a trade; the policy required all such recordings to be deleted or over-written after the 30 day retention period.
VI. As the telephone recording period expired much before the SEBI request was received, it was impossible for Morgan to furnish such recordings as on the date of the request made by SEBI i.e. October 05, 2004, Morgan had no recordings or transcripts of conversations held on May 14, 2004 and May 17, 2004.
VII. Therefore they had not violated Regulations 25(1) and 26(ii) of the Broker Regulations and therefore, no penalty may be imposed under Section 15A of the SEBI Act, 1992.
VIII. They were under no legal obligation to record any dealing room telephone lines and were under no legal obligation to store any such recordings or transcripts of such recordings for any period of time under any relevant SEBI rules, regulation or Code of Conduct.
IX. There was no requirement to make any recordings or to retain them for any specified period. The Policy is an internal requirement of Morgan and had no legal source for its existence.
X. Notwithstanding that the retention period for recordings under the policy had elapsed, as part of its due diligence in responding to the SEBI request, the Information Technology staff of Morgan had verified as to whether the relevant recording had been recycled pursuant to the requirements of the policy and had also checked its offsite BCP storage facility to verify whether the facility contained the said telephone recordings which would only had been the case, if in fact they had not been recycled pursuant to the policy.
XI. This effort was indicative of the fact that Morgan would have readily furnished the recordings to SEBI since they had no reason to suppress these from SEBI.
XII. Nowhere in the provisions set out in the Notice, or in any other provision of SEBI are phone recordings referred to, either directly or indirectly.
XIII. Section 15A of the SEBI Act, refers to “documents”, “returns” or “reports”.
XIV. Phone recordings are not “returns” or “reports” according to the ordinary meaning of those words. The definition of “documents” as cited in Black’s Law Dictionary is “(a)n instrument on which is recorded, by means of letters, figures or marks …. In this sense, the term “document” applies to writings”. Telephone recordings are not written and could not therefore be classified as documents.
XV. Section 15A(a) presumes that the “documents”, “returns” or “reports” are in the possession of the person or are otherwise required to be in the person’s possession. Otherwise, the provision would make no sense. Even if “documents” could be considered to encompass telephone recordings, there is no requirement that they be in Morgan’s possession and, were in fact not in their possession.
XVI. Section 15A(b) is not relevant to this situation as clearly there is no allegation that there is a filing requirement of the telephone recordings. The allegation concerns failure to furnish the telephone recordings pursuant to a SEBI request, in other words Section 15A(a).
XVII. Section 15A(c) refers to books of accounts and records. As telephone recordings would not be classified as books of accounts and records, the same does not apply.
XVIII. There is no requirement under the SEBI Act or Securities Contract (Regulations) Rules, 1957 (SCRR) to record dealing room phone conversations or to retain any such recordings for any period of time.
XIX. Rule 15(1) of the SCRR lists books of account and other documents which a member of a recognized stock exchange must maintain and retain for 5 years. Rule 15(2) of the SCRR further specifies documents which a member of a recognized stock exchange needs to maintain for 2 years. Voice recording of telephone conversations do not form part of any of these rules.
XX. Regulation 17(1) of the Broker Regulations lists the books of accounts, records and documents which a broker is required to keep and maintain. Recording of telephone conversations is not a part of this list and hence cannot be termed as books of accounts, records and documents. Accordingly, Regulation 18 of the Broker Regulations pertaining to 5 years of retention does not apply to voice recordings.
XXI. Thus neither the SEBI Regulations nor the Securities Contract (Regulations) Rules, 1957 require a broker to record telephone conversations in the dealing room and retain such recordings for a specified period.
XXII. There also are no requirements under the rules, regulations or bye-laws of the stock exchanges of which Morgan is a member, relating to such recordings. As such, Regulation 25(1)(d) of the Broker Regulations is not relevant to this situation.
XXIII. In the absence of any legal obligation for Morgan to record telephone conversations and to retain such recordings for a specific period and since the telephone recordings were actually not in their possession, they could not be held liable.
XXIV. They had not violated the Code of Conduct stipulated by SEBI under Regulation 26(ii) of the Broker Regulations in as much as the said Code does not set out any obligations or requirements to record telephone conversations and maintain such recordings.
XXV. They were not aware of any written documentary evidence to substantiate that efforts were made by them to confirm that the telephone recording tapes in question were reused pursuant to their policy.
XXVI. Their compliance department had checked orally with their Information Technology Division (IT) to confirm that tapes of the telephone recording of May 14 and 17, 2004 were not archived with and in their possession in October 2004. Thereafter the IT division confirmed orally to their Compliance Officer that the recording tapes were retained only for 30 days pursuant to their telephone recording policy.
XXVII. The request on October 05, 2004 for the telephone recording was the first request directed to Morgan in connection with the market events of May 14 and 17, 2004.
7. The following documents were forwarded.
a. Affidavit from Mr Chaitanya Wagh, Vice President of Morgan and head of IT, confirming that efforts were made by Morgan to check whether or not the said telephone recording tapes were in their possession, whereupon it was found that the tapes were reused pursuant to the 30 day retention policy as set out in their Telephone Recording Policy.
b. The Compliance Manual of Morgan containing inter alia their telephone recording (set out under clause 2.9 ) and Know Your Client Policies (set out under clause 2.2 of the Manual).
c. The Compliance Manual updated as of April 2003. Subsequently changes were made in the Account Opening Procedures, pursuant to exemptions granted by the SEBI Circular No.SEBI/MIRSD/DPS-1/Cir-31/2004 dated August 26, 2004 on Uniform Documentary Requirements for trading. Accordingly the updated Compliance Notice dated October 06, 2004 was enclosed.
APPRECIATION OF EVIDENCE
8. I have taken into consideration the facts and circumstances of the case, the submissions made on behalf of Morgan in the letters cited earlier and during the course of the hearing as well as the material available on record.
9. Before proceeding to consider the issues under consideration, it would be essential to recapitulate the facts in brief, leading to the present proceedings.
10. SEBI had initiated an investigation into the trading activity of various stock brokers, who were found to have created large short positions in the market on May 14, 2004 and May 17, 2004 to determine their possible involvement in the hammering of the prices of the shares during the said period. During the course of the investigation, it was inter alia found that Morgan Stanley and Company International Limited, a registered FII with SEBI, through its registered sub-account had allegedly dealt extensively in the cash segment and created large short positions in the market on May 14, 2004 and May 17, 2004. In all these dealings, Morgan Stanley and Company International Limited were found to have dealt through Morgan, their Indian broking entity. It appears that morning briefings given by Morgan on May 17, 2002 were allegedly pessimistic about the market. Most of the orders were found to be sell orders, received by Morgan prior to the opening of the market hours i.e. before 10 a.m. and there were apparently very few buy orders. In view of the same, SEBI called for the recording of the telephonic conversation of the dealing room of Morgan on May 14, 2004 and May 17, 2004, which admittedly was not provided by Morgan.
11. Thus the crux of the issue that emerges for my consideration is that although information by way of telephonic records was called for by SEBI from Morgan, the same was not provided, inter alia on the ground that they were not legally obligated to provide the said information and that even if they were obligated to do so, the required information could not be provided, as the same was not within their possession.
12. Based on the same, it would therefore be necessary to examine whether SEBI was within their right to call for telephony records by way of information and whether Morgan were obligated to so provide the said information and in the process to determine whether there was intentional non co-operation on the part of a SEBI regulated entity with the regulator, consequent to an act, practice or other approach, designed to divert the attention of the regulator, resulting in the violation of the regulatory requirement of providing the information called for or in other words, a failure to discharge the limited onus cast upon them vide the code of conduct as applicable to them.
13. As regards the preliminary objection raised by Morgan, I have considered the various points urged before me vide written submissions along with legal provisions cited in support thereof. Morgan have heavily relied upon the fact that no where in the provisions set out in the notice or in any other SEBI provisions, are phone recordings referred to, either directly or indirectly and in this context have discussed at length, the provisions of Section 15A of the SEBI Act and in particular, Section 15A(a) of the SEBI Act, 1992 to emphasize their contention that phone recordings cannot be turned as a “return” or “report” according to the ordinary meaning of these words and that the term “document” only applies to writings.
14. However the definition of the term ‘document’ as provided in section 3(18) of the General Clauses Act, may be perused in terms whereof, the word document shall include any matter written, expressed or described upon any substance, by means of letters, figures or marks, or by more than one of those means which is intended to be used, or which may be used, for the purpose of recording that matter. (As provided in Section 3 of the Indian Evidence Act 1872 and section 3 of the Indian Penal Code 1860) (Emphasis not provided)
15. There are also other interpretations to the said term.
“Any decipherable information which is set down in a lasting form would be a document, and if it is printed in India, it is hit by section 3 of the Press and Registration of Books Act 1867. (Public Prosecutor v T. Amrath Rao, 1960 Cr LJ 452.)
“In the interpretation of document, substance and not form is material. Tarakeshwar v Das Dey, AIR 1979 SC 1669
Thus contrary to the contention of Morgan, the term “telephone records” would come within the ambit of the term “document” and hence Morgan were obligated to provide the said information. Even otherwise, it is my considered opinion that keeping in mind the mandate of the SEBI Act, SEBI would have the power to call from any person associated with the securities market, such information as it may be consider necessary for the efficient discharge of its function.
16. To highlight this aspect and cut short the basic issue and discussion on the SEBI Act, I consider it necessary to reproduce the relevant paragraphs of the order of the Securities Appellate Tribunal in Appeal No.2/2001 reiterated by the Bombay High Court vide their order dated March 03, 2004 in Appeal No.7/2001:-
“……….The developing securities market, in the international scenario, including the growth of the capital market, necessitated a comprehensive legislation for setting up the Statutory Body to promote the orderly and healthy growth of the securities market. The Securities & Exchange Board of India Ordinance 1992 was, therefore, promulgated on 13.1.1992 and ultimately the SEBI Act has been enacted and notified on 14.4.1992. The statement of objects and reasons appended to the bill, as relevant, is reproduced as under:
“The capital market has witnessed tremendous growth, in recent times, characterized particularly by the increasing participation of the public investors confidence in the capital market can be sustained largely by ensuring investors protection. With this end in view, Government decided to vest SEBI immediately with statutory powers required to deal effectively with all matters relating to the capital market.”
While referring to the provisions as provided in Sections 15A and 15J of the SEBI Act, 1992, the Court was further pleased to observe as under :-
“……It is very clear that the above functions are provided to protect the interest of the investors in securities and to promote the development of, and to regulate the securities market, by appropriate and suitable rules, regulations, directions and orders. Those statutory functions and duties are in the interest of the public at large and to achieve the purpose and object of the Act, including of investors and the capital market. These powers and authorities which are provided to such regulatory agency, is to prevent or minimize various frauds, scams, apart from regulations of securities market. This is also essential to gain the public confidence and regulating the economy of the developing countries like India. The SEBI therefore, in order to protect the public and capital market, as regulator, has issued and published various guide-lines, regulations, rules, notifications, circulars etc, under the power conferred by Section 30 of the SEBI Act…………………”
“……The provisions of penalty, in the failure to furnish any documents, return or report or any information or books, within the specified period as per the regulations as contemplated under sections 15A (a),(b),(c) are in the form of mandatory provisions. These compliances therefore, in our opinion, are essential to serve the purpose and object of the Act, as referred above. The provisions of penalty for non-compliances of the said mandate of the Act is definitely with an object to have an effective deterrent to ensure better compliances of the provisions of such laws, which is in the interest of the public at large, investors and essential to regulate and control such markets ,through the regulatory authority like SEBI..”
“……It is now settled and reiterated by the Hon’ble Supreme Court, time and again that, “statute as is well known must be read in the text and context thereof”…..” the construction of a statute will depend on the purpose and object for which the same had been used. The purpose and object of the Act must be given its full effect and the entire statute must be read as a whole;” “Contextual reading is a well known proposition of interpretation of statute. The clauses of a statute should be construed with reference to the context vis a vis the other provision so as to make a consistent enactment of the whole statute relating to the subject matter”; “A statute is best interpreted when we know why it was enacted. With this knowledge, the statute must be read, first as a whole and then section by section, clause by clause, phrase by phrase and word by word”; “No part of a statute and no word of a statute can be construed in isolation”;…………………..
17. The above discussion along with the provisions referred therewith, leads to the irrefutable conclusion that a registered entity (including Morgan) is obligated to furnish or submit the detailed information/ documents (telephone records in the instant case) when called upon to do so by SEBI under the cited provisions, to enable it to perform its mandate, failing which the entity would be liable for monetary penalty under the relevant provisions which, in the instant case is Regulation 26(ii) of the Broker Regulations while Section 15A(a) of the SEBI Act, 1992 quantifies the monetary penalty to be imposed in such cases of default.
18. Having so held that SEBI is empowered to call for the telephone records of Morgan by invoking the provisions of Section 15A(a) of the SEBI Act, 1992 and Morgan were obligated to provide the said information that was in their possession, the question to be now determined is whether Morgan had the required information in their possession and yet refused to provide the same intentionally .
19. I have observed that in connection with the ongoing investigation of trades undertaken by SEBI in the month of May 2004, the investigation department of SEBI sent an email on October 05, 2004 to Morgan seeking the recording of the telephonic conversations/transcripts of their dealing room on May 14 and May 17, 2004. However in their reply dated October 07, 2004 sent by email, Morgan contended that as per their Telephone Policy, the telephonic recordings were retained only for 30 days where after they were erased or reused and hence were unable to send the transcript of the telephonic recordings of the dealing room for May 14 and May 17, 2004.
20. Thus the reason attributed by Morgan for non possession of the required information is the internal telephone policy mentioned in their Compliance Manual, a copy of which was submitted during the course of the present proceedings. A perusal of the relevant provision of the telephone recording policy as set out under clause 2.9 of the Compliance Manual is reproduced hereunder:
· All calls made by sales and trading staff and certain operation staff that relate to transactions concerning the Firm must be made on recorded telephone lines.
· Staff wishing to listen to or copy a voice recording must complete a request form set out in this Section.
· The Firm retains tapes for a period of 30 days after which they are erased and reused.
21. Clause 4 of the Compliance Manual states as follows:
· Cassette tapes are stored in a secure location which is accessible only by authorized personnel. Tapes are retained for a period of 30 days after which they are erased and reused.
22. Morgan have conceded that the policy was an internal requirement and had no legal source for its existence. In other words, it could be stated that there was no rule or regulation of SEBI which thrust upon them an obligation to preserve the said records or prevent them from erasing or reusing these tapes after the stipulated period of 30 days. Be that as it may, in the absence of any specific direction to the contrary or any order or even an indication to that effect being given by SEBI, within a reasonable period of time, it would not be proper to conclude that the tapes in question ought not to have been erased or recycled and instead ought to have been preserved by Morgan and duly furnished. Further, there is no evidence on record to contend that Morgan did not retain the recording of the telephonic conversations of their dealing personal on May 14 and May 17, 2004 since they were aware that SEBI is looking into all materials and documents pertaining to their trades of those specific days.
23. The only piece of evidence on record of the information sought by SEBI from Morgan is the email dated October 5, 2005. While investigation into the dealings as on May 14, 2004 and May 17, 2004 was initiated immediately, information was sought vide an email sent only on October 05, 2004 i.e., around four and half months later and well after the 30 days retention period had expired. It also appears that the request for telephone records was the first request directed to Morgan in connection with the market events of May 14 and 17, 2004.
24. In the materiality of the circumstances and in the scheme of the internal arrangements, it would stand to reason that there was no cogent reason for Morgan to have retained the telephonic records beyond the stipulated period of time which would have in fact amounted to non compliance of their policy.
It would however be relevant to examine whether any “due diligence” was executed by Morgan to provide the required information to the regulator.
25. Morgan have submitted an affidavit from Mr Chaitanya Wagh, Vice President of Morgan and head of IT, to indicate that efforts were made by them to obtain the relevant information. A reading of the affidavit confirms that upon receiving the email of SEBI, efforts were made by Morgan to check whether or not the said telephone recording tapes were in their possession, whereupon it was found that the tapes were reused pursuant to the 30 day retention policy as set out in their Telephone Recording Policy. Morgan have also submitted that they had checked their offsite BCP storage facility to verifying whether the facility contained the said telephone recordings. Having regard to the same, I have no hesitation in stating that adequate efforts appear to have been made by Morgan to verify whether the required information was in their possession.
26. These facts being as they are, it would be incorrect to conclude that the entity in question never intended to or consciously or deliberately avoided to comply with the obligations thrust upon them under the SEBI Act and the Regulations.
27. In this context, what strikes me is the maxim of equity which is well settled namely “lex non cogit ed impossibilia” i.e., the law does compel the impossible. An insight into the rationale of the maxim, based on certain apex court pronouncements would enable a better appreciation of the same.
28. In the case of State of Rajasthan and Anr Vs. Shamsher Singh 1985 (supp) - SCC – 416, the Supreme Court was pleased to hold that the doctrine of the impossibility of performance indicates that however mandatory the provision may be, where it is impossible of compliance, that would be sufficient excuse for non compliance particularly when it is a question of the time factor (emphasis not supplied).
29. In the case of Raj Kumar Vs. Tarapada (1987) 4 SCC 398, a similar view was held which reads as follows:
“……..…… The law, in its most positive and peremptory injunctions, is understood to disclaim, as it does in its general aphorisms, all intention of compelling impossibilities and the administration of laws must adopt that general exception in the consideration of all particular cases …………..the law does not compel a man to do that which he cannot possibly perform and an act of the Court shall prejudice no man would apply with full favour in the facts of this case ……….”
The aforesaid view has been endorsed by the apex court once again as reported in (1996) 1 SCC 169.
30. In the end, the final issue for determination is whether Morgan were required under law to retain the telephony records with them for a specified period.
31. In this context, my attention has been drawn to the various provisions of SEBI related laws that require intermediaries to retain specific documents for a specified period of time. Morgan have further relied upon their internal compliance policy to press their case that there was no willful non compliance on their part to provide the information called for.
32. The relevant provisions that call for preservation/retention of documents for a specified period are Rule 15 of the Securities Contract (Regulations) Rules, 1957 and Regulations 17 and 18 of the Broker Regulations.
33. Rule 15(1) of the SCRR lists the specific books of accounts and the documents which a member of recognized stock exchange must maintain and retain for 5 years i.e. the register of transactions (sauda book), the client’s ledger, the general ledger, journals, cash book, bank pass book and the documents register showing particulars of securities received and delivered in physical form. Further in terms of Rule 15(2) of the SCRR, the members’ contract books showing details of the transactions entered into with the members of the same exchange or counter foils or duplicates of memos of confirmations issued to such other members, counter foils or duplicates of contract notes issued to clients and written consent of clients in respect of contracts entered into as principals are required to be maintained for a period of 2 years.
34. Apart from the documents mentioned above, Regulation 17 of the Brokers Regulations specifies that every stock broker is also mandatorily required to maintain the margin deposit book, registers of accounts of sub brokers and agreement with the sub brokers specifying the scope of authority and the responsibilities of the stock brokers and such sub brokers, as well as a copy of the audited balance sheets and profits and loss account as and when required. These documents and the books of account and other records are required to be preserved and maintained for a minimum period of 5 years under Regulation 18 of the Broker Regulations.
35. Thus, upon a close reading of the aforesaid provisions, it is amply clear that telephone records have not been specifically listed as part of the books of accounts, records and documents that are mandatorily required to be preserved by the broker for a specified period of time.
36. From the above discussion, the issue that stands out is that where the law creates a duty or charge and the party is unable to perform the said duty without any default, then the law in general excuses such lapse.
37. Considering the facts and circumstances of this case in its entirety I am inclined to hold that this is not a case where the entity failed to furnish the information sought for, citing reasons like client confidentiality etc., but a case where it was not possible to furnish the said information since it did not exist as on the date when the information was sought and hence non submission of the information would not make them liable under the provisions of the SEBI Act.
38. Thus my views in the case are summed up as follows:
i. The term “telephone records” would fall within the ambit of the term “document” as provided in Section 15A(a) of the SEBI Act, 1992.
ii. SEBI is empowered under 15A of the SEBI Act, to call from any person associated with the securities market, such information as it may consider necessary under the cited provisions for the efficient discharge of its function as per the mandate laid down under the SEBI Act.
iii. The entity in question is obligated to furnish /submit detailed information when called upon to do so by SEBI under the cited provisions.
iv. There is no case against Morgan of consciously /deliberately /intentionally avoiding complying with the directions of SEBI in providing the required information, since the information in question was not within their possession.
v. In any case, Morgan were not obligated to preserve the required information.
vi. Even otherwise, based on doctrine of impossibility of performance, the act of Morgan in not furnishing the information that is not within their possession does not render them liable.
39. Having regard to the aforesaid, I in exercise of the powers conferred upon me under Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995, am of the considered opinion that no penalty need be levied upon M/s J M Morgan Stanley Securities Private Ltd and accordingly the proceedings initiated against them are hereby dropped.
PLACE: MUMBAI G. BABITA RAYUDU
DATE: OCTOBER 27, 2005 ADJUDICATING OFFICER