SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
Under Section 11B and 19 of the Securities and Exchange Board of Act, 1992 read with Regulation 13 of the Securities and Exchange Board of India ( Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 against M/s. Times Securities Limited.
WTM/GA/87/ISD/08/06
1.0 Background
1.1 M/s. Times Securities Limited (hereinafter referred to as “TSL”) is a Sub-broker registered with Securities and Exchange Board of India (hereinafter referred to as SEBI) bearing registration no. INS 170090232. TSL was affiliated to Shri Arun Kumar Giridhar, Member, Bhubaneshwar Stock Exchange Ltd. (hereinafter referred to as BhSE) who is a stock broker registered with SEBI under certificate of registration no. INB170254010.
1.2 The Council of Management of BhSE at its meeting held on Agust 07, 1996 had established a Trust called ‘Bhubaneshwar Stock Exchange Members Welfare Trust’ (hereinafter referred to as MWT). A trust deed was executed between BhSE and the trustees of MWT and the same was registered on September 23, 1996. As per the terms of the trust deed, every member of BhSE contributed a sum of Rs.3,000/- per annum to the corpus of the fund. One of the objectives of MWT was to sanction loans to members to tide over temporary financial difficulties on their part in payment of dues to the clearing house of the exchange.
2.0 Inquiry Proceedings
2.1 Pursuant to the request made by BhSE, SEBI, vide order dated September 20, 2001, instituted an inquiry under Section 6 of Securities Contract (Regulations) Act, 1956, into the affairs of BhSE with respect to the allegations of financial irregularities in the MWT’s Funds by its Trustees to the extent of Rs.1.30 crores.
2.2 The Inquiring Authority submitted his report on October 22, 2001, interalia specifying the following findings:
· BhSE had neither sought the permission nor sent any intimation to SEBI regarding the formation of MWT.
· Major portion of the loans sanctioned were used for making payments to IFGL, member of NSE. Shri Tulsi D. Bhayana and Shri Ashok Sardana, both Directors of IFGL, are also the promoters of TSL and therefore it is necessary for SEBI to take steps to restore investor confidence as the credibility of TSL, a sub-broker, has been adversely affected.
3.0 Interim Order
3.1 On the basis of the findings of the aforesaid inquiry, an interim order dated October 29, 2002 was passed by SEBI prohibiting TSL from buying, selling or otherwise dealing in the securities market till further orders, on the ground that its promoters, Shri Ashok Sardana and Shri Tulsi D Bhayana who were also directors of Indian Finance Guaranty Limited (IFGL), member NSE, were involved in the irregularities relating to the siphoning off the funds from Members’ Welfare Trust of the BhSE.
4.0 Enquiry proceedings
4.1 An Enquiry Officer was appointed vide order dated 07.07.2003 to conduct an enquiry in terms of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to as the “Enquiry Regulations”), into the alleged acts of omissions and commissions of TSL.
4.2 The Enquiry Officer, after following the procedure under Enquiry Regulations, submitted her report recording as under :
(a) The show cause notice dated 30.7.2004 was issued to TSL, primarily on account of alleged involvement of its directors, i.e. Shri Ashok Sardhana and Shri Tulsi Bhayana (who were also the directors of IFGL, a member of NSE) in the financial irregularities of the Members’ Welfare Trust of the BhSE, in the matter of the disbursement of certain loans granted by the said Trust and the consequent benefit derived from the said loans.
(b) Although SEBI vide orders dated October 29, 2002 and January 16, 2004 prohibited Shri Ashok Sardhana from buying, selling or otherwise dealing in the securities market till further orders, later on, SEBI vide its order dated September 22, 2004 vacated the said prohibition after finding that he was neither a Trustee of the Members’ Welfare Trust nor an office bearer of the Exchange during the relevant period. SEBI order also recorded that Shri Sardana was not a sanctioning authority during the said period and therefore held that Shri Sardana could not have been aware of or involved in the irregularities of the Trust.
(c) SEBI passed another order of similar nature dated September 22, 2004 in the matter of IFGL, in which both Shri Sardana and Shri Bhayana were directors.
d) Shri Tulsi D. Bhayana resigned as Director of TSL on December 29, 1999 which was intimated to SEBI vide letter dated December 29, 1999 and that Form 32 and receipt dated February 11, 2000 was issued by the ROC to this effect
(e) Taking into account the fact that SEBI, after detailed investigation proceedings, concluded that neither Shri Sardana nor IFGL nor any person connected with IFGL had anything to do with the financial irregularities relating to the Members’ Welfare Trust of BhSE and thereafter passed the orders dated September 22, 2004 vacating the prohibition orders imposed on the said entities earlier, there does not appear to be any case to proceed against TSL further in the matter.
(f) Further, TSL vide letter dated August 2, 2004 surrendered the certificate of sub-broker to SEBI for cancellation. The enquiry officer also noted that the main broker of TSL i.e. M/s. Girdhar & Co. had also vide their letter dated August 2, 2004 inter-alia submitted that the agreement entered into with their sub broker had been terminated and hence requested for the cancellation of the said certificate of registration granted to their sub broker.
4.5 In view of the aforesaid, the Enquiry Officer recommended that present proceedings initiated against TSL be dropped.
5.0 Consideration of issues
5.1 I have carefully considered the facts of the matter, the Enquiry Report and other material on record.
5.2 I note that SEBI after detailed investigation has concluded that neither Shri Ashok Sardana nor IFGL had anything to do with the financial irregularities relating to the Members Welfare Trust of BhSE and thereafter passed the orders dated September 22, 2004 vacating the prohibition orders imposed on the said entities earlier.
5.3 I also note that Shri Tulsi D. Bhayana resigned as Director of TSL on December 29, 1999 which was intimated to SEBI vide letter dated December 29, 1999 and that Form 32 and receipt dated February 11, 2000 was issued by the ROC to this effect. Therefore, there does not appear to be any case to proceed against TSL further in the matter.
5.4 I also note that TSL vide letter dated August 02, 2004 surrendered the certificate of sub-broker to SEBI for cancellation. Even the main broker of TSL i.e. M/s. Giridhar & Co. vide their letter dated August 02, 2004 inter-alia submitted that the agreement entered into with their sub-broker had been terminated and hence requested for cancellation of the certificate of registration granted to their sub-broker.
5.5 In view of the above, I agree with the observations of the Enquiry Officer that there is no material or other evidence on record to suggest that TSL was aware of or involved in the irregularities at the Members’ Welfare Trust of BhSE.
6.0 Order
6.1 Therefore, I, in exercise of powers conferred upon me under Section 11B and 19 of the SEBI Act read with Regulation 13(4) of the Enquiry Regulations, do not find this to be a fit case for imposing any penalty on the sub-broker M/s. Times Securities Limited. Accordingly, the prohibitions imposed on M/s. Times Securities Limited vide orders dated October 29, 2002 and January 16, 2004 also is vacated.
6.2 Order accordingly.
G. ANANTHARAMAN