CHIEF GENERAL MANAGER
INVESTIGATION DEPARTMENT
IVD/ ID3/ PKB/ PB/ MGL/ SCN/ 101605 / 2007
August 16, 2007
1. Panther Fincap and Management Services Ltd.
121, Radha Bhavna , 1st Floor,
Nagindas Master Road,
Fort,
Mumbai – 400 023.
2. Classic Credit Ltd.
121, Radha Bhavna , 1st Floor,
Nagindas Master Road,
Fort,
Mumbai – 400 023.
3. Saimangal Invest Trade Ltd.
121, Radha Bhavna , 1st Floor,
Nagindas Master Road,
Fort,
Mumbai – 400 023.
4. Luminant Investments Pvt. Ltd.
121, Radha Bhavna , 1st Floor,
Nagindas Master Road,
Fort,
Mumbai – 400 023.
5. Kensington Investments Ltd.
Les Cascader, 3rd Floor,
Edith Cavel Street,
Port Louise,
Mauritius – 400 005.
6. European Investments Ltd.
107, Doctor Centre,
135, August Kranti Marg,
Mumbai – 400 036.
7. Wakefield Holdings Ltd.
Les Cascader, 3rd Floor,
Edith Cavel Street,
Port Louise,
Mauritius – 400 005.
8. Brentfield Holdings Ltd.
Les Cascader, 3rd Floor,
Edith Cavel Street,
Port Louise,
Mauritius – 400 005.
Dear Sir/ Madam,
Sub:- Show Cause Notice under Section 11(4)(b) & 11B of Securities and Exchange Board of India Act, 1992, in the case of Mascon Global Ltd.
1.0 The Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) had conducted an investigation into the alleged price manipulation in the scrip of Mascon Global Ltd. (hereinafter termed as ‘MGL’), formerly known as Assan Leasing and Finance Ltd., for the period August 1999 to March 2000 and December 2000 to March 2001.
2.0 The findings of the investigation as far as it relates to you, (i) Panther Fincap and Management Services Ltd., (ii) Classic Credit Ltd., (iii) Saimangal Invest Trade Ltd., (iv) Luminant Investments Pvt. Ltd., (v) Kensington Investments Ltd., (vi) European Investments Ltd., (vii) Wakefield Holdings Ltd. and (viii) Brentfield Holdings Ltd., are as follows:
2.1 During the period December 2000 to March 2001, substantial volumes in the scrip were recorded and entities and overseas corporate bodies controlled by Shri Ketan Parikh transacted in the scrip heavily. Substantial increase in the volumes in the scrip of MGL was witnessed since the first week of December 2000 and this trend continued till March 2001. A perusal of the price volume chart of MGL from April 2000 to March 2001, indicated that between April 2000 to November 2000 only 9,05,329 shares of MGL were traded at Bombay Stock Exchange Ltd. (hereinafter referred to as ‘BSE’). The volumes in the scrip increased substantially during the period December 2000 (to be specific, volumes in MGL climbed from December 04, 2000 onwards) to the last week of March 2001. In fact, from the price-volume data it was observed that approximately 3,14,40,000 shares of MGL were traded during the period December 01, 2000 to March 31, 2001. During the period April 2001 to July 2001(i.e period when the market was falling) only 21 lakh shares of MGL were traded. Out of 3,14,40,000 shares traded between December 01, 2000 to March 31, 2001, approximately 2,97,40,600 shares were traded between December 04, 2000 to March 01, 2001, i.e. approx 95% of the trading activity was concentrated during this period. As regards the price movement, it was observed that as on December 04, 2000, the scrip closed at Rs. 483.35; on December 20, 2000, the closing rate was Rs. 505.60; as on January 18, 2001, it was Rs. 384; as on February 23, 2001, it was Rs. 296 and thereafter the scrip price gradually fell to touch Rs. 84 as on March 30, 2001. The price volume data is enclosed as Annexure ‘A’. Annexure ‘B’ shows the graphical representation of the price movement of MGL vis-a- vis sensex movement. There was attempt to depress the scrip price during the period January 01 to February 15, 2001.
2.2 The floating stock of MGL was very thin and the same is evident from the price-volume data of the earlier period when the scrip witnessed huge price movement. MGL is a closely held company and the same was evident from analysis of share holding pattern (prior to Dec 2000). Distribution schedule as on February 24, 2000, is provided in the table below:
|
Perticulars
|
Existing
|
%-age
|
Equity issued on conversion of 10% FCD
|
Total
|
%-age
|
|
Promoters
|
22,16,630
|
69.25
|
0
|
22,16,630
|
59.90
|
|
FII
|
3,18,000
|
9.94
|
0
|
3,18,000
|
8.59
|
|
NRI/OCBs
|
1,57,000
|
4.91
|
1,90,500
|
3,47,500
|
9.39
|
|
Domestic Corporate Bodies
|
2,87,700
|
8.99
|
1,20,300
|
4,08,000
|
11.02
|
|
Domestic Mutual Fund
|
0
|
0
|
1,00,000
|
1,00,000
|
2.70
|
|
Public
|
2,21,470
|
6.92
|
89,200
|
3,10,670
|
8.39
|
|
Total
|
32,00,800
|
100.00%
|
5,00,000
|
37,00,800
|
100.00
|
2.3 MODUS OPERANDI AND GENERAL OBSERVATIONS
2.3.a The modus operandi employed by Shri Ketan Parikh (KP) and his associate companies/ entities namely, Panther Investrade Ltd., Panther Fincap and Management Services Ltd., Classic Credit Ltd., Saimangal Invest Trade Ltd. and Luminant Investments Pvt. Ltd. and the Overseas Corporate Body’s (OCB) namely, Kensington Investments Ltd., European Investments Ltd., Wakefield Holdings Ltd. and Brentfield Holdings Ltd., acting as front to KP is that these entities and the OCB’s placed large sale orders through brokerage firms such as Credit Swiss First Boston (India) Securities Pvt. Ltd. (CSFB), Triumph Securities Ltd., etc and such sell orders were synchronized with the corresponding buy orders (again placed by the KP group clients and related/ associated OCB). This resulted in creation of artificial volumes in the scrip. As already brought out the scrip of MGL was thinly traded prior to December 2000. It is a common phenomenon that the general investing public may get induced to invest in the scrip after seeing the volumes generated (as they are not aware of the circular/ fictitious trading taking place in the scrip between KP related clients/ OCB’s). While the KP related/ associated entities/OCBs’ used to place the sale transactions through brokerage houses like Triumph, CSFB etc, the other leg of the transaction i.e the purchases also used to be dominated by some related entity, which only confirms that fictitious trading was taking place in the scrip on a rampant note without any change in the beneficial ownership. These artificial trades/ fictitious trades which were circular in nature amounted to market manipulation in the scrip.
2.3.b An interesting sidelight of this operation is how such huge volumes were transacted using the automated trading system of the exchange. Brokers generally argue that in a screen based system they are not aware of the counter party brokers. However, it has been observed that even this system is prone for manipulation. Brokers call this the “1, 2, 3 system” for manipulating the automated order-matched system. Identical buy and sell orders in terms of price, quantity for such collusive transactions are keyed into the respective computers (i.e by buy and sell broker with a tacit understanding). After this, the dealers using telephone hit the buy and sell button simultaneously on the count of three, thereby synchronizing the trades within seconds. The known investment concerns of the KP group are Panther Investrade Ltd., Panther Fincap and Management Services Ltd., Classic Credit Ltd., Saimangal Invest Trade Ltd. and Luminant Investments Pvt. Ltd. The trading pattern in the scrip of MGL after December 2000 suggested that the KP related clients and OCB’s namely, Kensington Investments Ltd., European Investments Ltd., Wakefield Holdings Ltd. and Brentfield Holdings Ltd., used to sell the shares through brokers such as Triumph and CSFB in large quantities and these shares were purchased again by the entities belonging to the KP circles (the other leg of the transaction i.e purchases). It was observed that Ketan Parikh group had introduced these OCB’s to various banks for opening account etc. The selling clients received an early pay out facility from the selling brokers (the facility was mostly received from CSFB who appeared to have acted as a financing broker to KP) before the designated pay out date and this money received prior to the pay out date was again used to manipulate the shares (as the KP clients were continuously purchasing and selling). These are clear manipulative transactions and were in the nature of “circular Trading”.
2.3.c The scrip of MGL was highly illiquid prior to December 2000. Analysis of volume in the scrip of MGL prior to December 2000 indicated that the scrip was traded with thin volumes. MGL is a closely held company and the floating stock in the scrip was thin. This can be seen from the manner in which the scrip price rose to phenomenal levels during the period August 1999 to March 2000. Even after March 2000 and upto November 2000, the scrip was trading with thin volumes. It was only after December 2000 that huge volumes in the scrip were noticed and the Ketan Parikh related entities and OCB’s mentioned above were delivering huge quantities of shares of MGL in the market (mostly 5 lakhs and above and sometimes even delivering 10 lakh shares and more etc). During this period only KP related entities and OCB’s were mainly active in the scrip. It is clear that such huge volumes in the scrip could be due to some entities (including the promoter group) off-loading substantial chunk of shares to the clients mentioned above either directly or indirectly. When the movements of shares from the delivering clients were back tracked it was observed that huge quantities of shares were off-loaded by way of off market transfers from the account of:
i. Mascon Information Technologies Ltd – Promoter company of MGL.
ii. CSI Technologies Ltd – who were allotted substantial quantities of shares in a preferential allotment of MGL and this entity also shared the same address as that of MGL (as evident from the DP transaction statements – copy enclosed as Annexure C), implying strong connections of CSI Technologies with the management of MGL.
2.3.d CSI Technologies Limited were allotted 7,20,000 shares of MGL in a preferential allotment made by the company in April 2000 (date of allotment 6.4.2000). Subsequently, their holdings have increased due to a bonus issue made by MGL.
2.3.e The movement of shares from the promoter company of MGL and from CSI Technologies to various entities/clients OCB’s etc is explained as under:
i. On December 01, 2000, it was observed that CSI Technologies Ltd. sold 20,00,000 shares of MGL to Kensington Investments. Another 5 lakh shares were sold on December 07, 2000, to the account of Kensington Investments. Both the transactions were done off-market.
ii. The examination of the DP statement of Mascon Information Technologies Ltd (promoters of MGL) maintained with Karvy Consultants – Client ID 11451458 (Mascon Info Tech Ltd was earlier known as MarteK Holdings Inc, USA and promoter company of MGL) (copy enclosed as Annexure D) brought out that on January 02, 2001, a pledge for 20,00,000 shares of MGL was created in favors of Himachal Futuristic Corp Ltd (HFCL). On February 23, 2001, the above pledge was invoked and 20,00,000 shares of MGL were seen transferred (off-market) from the account of Mascon Information Technologies to the account of HFCL (DP account No 10416000 maintained by HFCL with IDBI bank Ltd).
iii. Examination of the DP statement of Mascon Information Technologies Ltd with Karvy Consultants - Client ID 11451458) revealed that 10 lakh shares of MGL were sold by Mascon Information Technologies by way of an off-market transaction on January 30, 2001 and the purchaser was Wakefield Holdings Ltd (status - OCB controlled by Ketan Parekh). The trading records further established that Wakefield sold these shares in the market through CSFB and Triumph securities on various dates. Details of trades by Wakefield is given below:
|
Trade No
|
Buy TM
|
Assigned Buy Client
|
Buy Order Time
|
Sale TM
|
Assigned Sale Client
|
Sale Order Time
|
Trade Qty
|
Trade Price
|
Trade Date
|
Trade Time
|
Order Time Diff.
|
|
36
|
324
|
|
10:49:34
|
497
|
Wakefield
|
10:49:33
|
500000
|
354
|
1/30/2001
|
10:49:34
|
0:00:01
|
|
2
|
372
|
Classic Credit
|
10:46:18
|
372
|
Wakefield
|
10:46:20
|
82000
|
345
|
2/1/2001
|
10:46:20
|
0:00:02
|
|
185
|
372
|
Classic Credit
|
12:53:47
|
372
|
Wakefield
|
12:53:47
|
218000
|
334
|
2/1/2001
|
12:53:48
|
0:00:00
|
|
186
|
372
|
Classic Credit
|
12:54:09
|
372
|
Wakefield
|
12:54:10
|
200000
|
334
|
2/1/2001
|
12:54:11
|
0:00:01
|
iv. Examination of the DP statement of Mascon Information Technologies with Karvy Consultants – client Id 11451458 revealed that Mascon information Technologies had on January 31, 2001 sold 2,50,000 shares of MGL by way of an off-market deal to Brentfield Holdings Ltd. (an OCB controlled by Ketan Parikh).
v. On February 01, 2001, Mascon Info Technology had sold 7,50,000 shares of MGL by way of off-market transaction to Brent Field Holdings Ltd (a Ketan Parekh controlled OCB).
2.3.f In the above manner it was observed that the promoter group company of MGL off-loaded roughly 40 lakh shares of MGL to various entities/ OCB’s controlled by Ketan Parikh, which is important to note as this was the reason being substantial volumes witnessed in the scrip during the period under investigation. As already brought out the scrip of MGL was illiquid prior to December 2000 and the sudden surge in the volumes was entirely on account of off-loading by the promoter group entities of MGL as explained above. It appeared that the promoter group company of MGL aided and abetted the OCB’s and entities belonging to Ketan Parikh in a big way as such large quantities of shares had come into the market only due to the off-loading by Mascon Info Tech and CSI Technologies as brought out above. The timing of such off-loading and also the fact that consideration was not received in respect of such sales clearly goes to prove the role of the management in aiding and abetting the Ketan Parikh group/ OCB’s. No other reason could be drawn behind sudden off-loading of substantial chunk of shares to the Ketan Parekh controlled clients/entities and that too after December 2000 (period when the scrip witnessed abnormal volumes and Ketan parekh controlled clients and OCB’s were only active in the scrip
2.4 It was observed that during the relevant period you, (i) Panther Fincap and Management Services Ltd., (ii) Classic Credit Ltd., (iii) Saimangal Invest Trade Ltd., (iv) Luminant Investments Pvt. Ltd., (v) Kensington Investments Ltd., (vi) European Investments Ltd., (vii) Wakefield Holdings Ltd. and (viii) Brentfield Holdings Ltd. had bought 2,34,21,159 shares and sold 2,48,56,403 shares. It was observed that on most of the occasions trades were executed between the related/ connected/ associated entities. The time difference between the buy order and the sale order placed were few seconds only. Details of the trades entered into by you (of quantity more than 1,000 shares) are provided as Annexure ‘E’.
2.5 a. It was also observed that, Panther Fincap and Management Services Ltd. entered into numerous fictitious trades as it appears as both buyer as well as seller in such trades. Such trades amounted in creation of artificial volume in the scrip to the extent of 29,99,500 shares. The orders for such trades were placed in close proximity to ensure that such orders get executed with their counter party orders. Details of such trades are given in the following table:
|
Trade No
|
Buy TM
|
Assigned Buy Client
|
Buy Order Time
|
Sale TM
|
Assigned Sale Client
|
Sale Order Time
|
Trade Qty
|
Trade Price
|
Trade Date
|
Trade Time
|
Order Time Diff.
|
|
144
|
558
|
Panther Fincap
|
#N/A
|
497
|
Panther Fincap
|
#N/A
|
495108
|
300
|
3/1/2001
|
13:37:42
|
#N/A
|
|
145
|
85
|
Panther Fincap
|
#N/A
|
497
|
Panther Fincap
|
#N/A
|
504892
|
300
|
3/1/2001
|
13:37:43
|
#N/A
|
|
17
|
248
|
Panther Fincap
|
11:48:35
|
497
|
Panther Fincap
|
11:48:34
|
201460
|
269
|
3/2/2001
|
11:48:35
|
0:00:01
|
|
18
|
558
|
Panther Fincap
|
11:48:41
|
497
|
Panther Fincap
|
11:48:34
|
50000
|
269
|
3/2/2001
|
11:48:42
|
0:00:07
|
|
19
|
85
|
Panther Fincap
|
11:48:35
|
497
|
Panther Fincap
|
11:48:34
|
500000
|
269
|
3/2/2001
|
11:48:55
|
0:00:01
|
|
20
|
558
|
Panther Fincap
|
11:49:02
|
497
|
Panther Fincap
|
11:48:34
|
450000
|
269
|
3/2/2001
|
11:49:02
|
0:00:28
|
|
40
|
558
|
Panther Fincap
|
11:52:25
|
497
|
Panther Fincap
|
11:52:25
|
297901
|
287
|
3/2/2001
|
11:52:26
|
0:00:00
|
|
41
|
140
|
Panther Fincap
|
11:52:25
|
497
|
Panther Fincap
|
11:52:25
|
200000
|
287
|
3/2/2001
|
11:52:26
|
0:00:00
|
|
42
|
248
|
Panther Fincap
|
11:52:40
|
497
|
Panther Fincap
|
11:52:25
|
2099
|
287
|
3/2/2001
|
11:52:40
|
0:00:15
|
|
77
|
460
|
Panther Fincap
|
12:05:38
|
497
|
Panther Fincap
|
12:05:34
|
88300
|
287
|
3/2/2001
|
12:05:38
|
0:00:04
|
|
78
|
478
|
Panther Fincap
|
12:05:39
|
497
|
Panther Fincap
|
12:05:34
|
130000
|
287
|
3/2/2001
|
12:05:39
|
0:00:05
|
|
79
|
250
|
Panther Fincap
|
12:05:43
|
497
|
Panther Fincap
|
12:05:34
|
50000
|
287
|
3/2/2001
|
12:05:43
|
0:00:09
|
|
81
|
85
|
Panther Fincap
|
12:06:06
|
497
|
Panther Fincap
|
12:05:34
|
29740
|
287
|
3/2/2001
|
12:06:06
|
0:00:32
|
b. The analysis of the trades that got matched within 10 seconds was done and it appeared that about 90% of the transactions done during the period December 2000 to March 2001 got matched within 10 seconds (as evident from Annexure E). This goes to prove that the transactions were pre-arranged. Incidentally, the entire trading was concentrated in the hands of the entities belonging to Shri Ketan Parikh and the OCBs were the clients for and on whose behalf these trades were carried out. There were some trades that got matched immediately [i.e. within 0.00.00 seconds]. It appeared that the buying and selling clients in connivance with the brokers placed orders in the scrip from the same office premise and the trade orders (both buy & sell) were placed at almost at the same time and this is clear from the instances cited in the annexed trade details.
c. The above transactions are possible only with a tacit understanding between the buying and the selling brokers/ clients. It appeared that the clients belonging to Shri Ketan Parikh and also the related/ connected/ associated OCB clients had grossly misused the trading system prevailing at the exchange (s).
2.6 a. It appears that the modus operandi was that a seller who sold the shares through CSFB transfers the shares to the demat/ pool account of CSFB. On such a transfer, CSFB would make payment to the seller immediately, i.e. before the normal pay out date. Invariably, the trade date, transfer to the member pool account date and the payment date made by the selling member is the same. An analysis to ascertain this was made and details were collected from CSFB who appeared as the main broker who sold the shares on behalf of various Ketan Parekh related entities/ clients. The table mentioned below explains the above finding.
|
Date of transaction
|
Qty sold
|
Net amount
|
Date when securities received in member’s pool a/c
|
No.of shares received (Qty)
|
Instrument details issued to clients –Cheque/DD/PO No/ and date
|
Name of the bank and branch
|
Issued in favour of (Client Name)
|
|
04-Dec-00
|
1,500,000
|
654030000.00
|
04-Dec-00
|
1500,000
|
Cheque no.986457 dated 4.12.2000
|
Stanchart, Fort branch
|
Kensington Investments Ltd.
|
|
11-Dec-00
|
500000
|
260130000.00
|
11-Dec-00
|
500000
|
Cheque no.735544 dated 11.12.2000
|
Hongkong , MG Road, branch
|
Kensington Investments Ltd.
|
|
08-Jan-01
|
1000000
|
354770000.00
|
08-Jan-01
|
1000000
|
Pay Order no. 653037 dated 08.01.01
|
Citibank , Fort branch
|
Luminnat Investmnets Pvt.Ltd.
|
|
16-Jan-01
|
1000000
|
376580000.00
|
16-Jan-01
|
1000,000
|
Cheque no. 986127 dtd.16.01.01
|
Stanchart , Fort branch
|
Kensington Investments
|
|
18-Jan-01
|
880,000
|
343296800.00
|
18-JAN-01
|
880000
|
Cheque no.986131 dtd.18.01.01
|
Stanchart , Fort bran
|
Kensington Investments
|
|
19-Jan-01
|
300000
|
114789,000.00
|
19-Jan-01
|
300000
|
Pay order no.044675 dtd 19.01.01
|
Stanchart , Fort branch
|
Luminnat Investmnets Pvt.Ltd
|
|
24-Jan-01
|
1000000
|
367940,000.00
|
24-Jan-01
|
1000000
|
Pay order no. 44852 dated 24.01.01
|
Stanchart , Fort bran
|
Luminnat Investmnets Pvt.Ltd
|
|
30-Jan-01
|
500000
|
3,52,590,000.00
|
31-Jan-01
|
1000000
|
Cheque no. 986147 and 986148 dated 30.01.01
|
Stanchart , Fort branch
|
Brentfield
|
|
30-Jan-01
|
850000
|
1,75,410,000.00
|
30-Jan-01
|
500000
|
Cheque no. 986146 dated 30.01.01
|
Stanchart , Fort bran
|
Wakefield
|
|
01-Feb-01
|
300000
|
309986,500.00
|
01-Feb-01
|
850000
|
Cheque no. 986502 dtd 1.2.01
|
Stanchart , Fort branch
|
Kensington
|
|
01-Feb-01
|
1000000
|
100785000.00
|
01-Fb-01
|
300000
|
Cheque no. 61559 dtd 1.2.01
|
ICICI, N.,Pt.
|
Luminant
|
|
09-Feb-01
|
1000000
|
324450000.00
|
09-Feb-01
|
1000000
|
Cheque no. 295021 dated 9.2.01
|
HDFC Fort branch
|
Luminant
|
|
12-Feb-01
|
1000000
|
309000,000.00
|
12-Feb-01
|
1000000
|
PO no. 061580 dtd 12.2.01
|
ICICI, N Pt.
|
Luminant
|
|
20-Feb-01
|
2000000
|
602720000.00
|
20-Feb-01
|
1000000
|
Cheq no.804474,475,476 dated 20.2.01
|
ICICI, N Pt.
|
Luminant
|
|
23-Feb-01
|
2000000
|
602720000.00
|
23-Feb-01
|
2000000
|
PO no.46059 dtd 23.2.01
|
Stanchart Fort branch
|
Luminant
|
|
|
|
|
|
|
|
|
|
|
01-Mar-01
|
1000000
|
297120000.00
|
1000000
|
1000000
|
PO 120946 dtd 1.3.01
|
ABN Amro, Fort branch
|
Panther Fincap
|
|
02-Mar-01
|
2000000
|
546580000.00
|
2000000
|
1000000
|
Che no.213553 dted 2.3.01
|
HDFC Fort branch
|
Panther fincap
|
b. Thus, it can be seen from the above table that the settlement obligation was totally discharged by CSFB on almost all occasions instead of the seller. CSFB had played their role in a significant way and have performed their duty as financing brokers. They were also responsible for synchronizing the trades (on behalf of their clients) with counterparty brokers thereby abusing the trading system of the exchange. In the normal circumstances, in respect of the sale transactions, the seller is entitled for the money in respect of the shares sold by him only after the payout is completed. In this case, as can be seen above, cheque payments were made invariably on the transaction date itself to accommodate the clients belonging to the Ketan Parikh group and also to accommodate the OCBs such as Kensignton, Wakefield and Brentfield (who appeared to be closely connected to the Ketan parikh circles, as detailed earlier). It appears from the details submitted by CSFB and submissions made by the clients that they have made the payments to the clients only after they received the shares [sold by the clients] into their pool account. It can be said that the above mentioned transactions are clearly in the nature of funding/ financing transactions, as majority of the trades were matched amongst the related parties (both purchasing clients and selling clients were related entities). It appears that financing transactions were given the color of securities transactions. Thus, the volumes generated were artificial in nature as on account of the above stated transactions and a false/ artificial market for the securities of MGL was created. The brokers including CSFB and Triumph have acted in concert with the entities related/ connected/ associated entities of Shri Ketan Parekh for creation of a false market/ artificial in the scrip of MGL during the December, 2000 to March, 2001. The selling clients received an early pay out facility from the brokers and since the purchasing clients were related to the selling clients and were buying the shares through counterparty brokers, the clients virtually enjoyed the credit facility.
c. In respect of the sale transaction put through CSFB, varying rate of brokerage was being charged by CSFB on the clients. It was observed that the brokerage charged by CSFB depended upon the timing of the transaction and the proximity to the payout date fixed by the exchange. For instance, if a transaction was placed on a date nearer to the payout date, brokerage scales charged by CSFB were comparatively lower/ narrowed down. If there was a gap of 5 to 6 days between the trade date and the payout date then the brokerage scales was relatively higher (there could be hidden cost/ interest element attached to it). In other words, it was observed that brokerage scales is reduced as the payout date approaches. The following details indicate the scale of brokerage charged by CSFB in respect of their sales transactions.
|
Trade Date
|
Qty sold
|
Client
|
Brokreage (%)
|
|
4.12.00
|
15 lac shares
|
Kensington
|
3.98 - 0.90%
|
|
11.12.00
|
5 lac “
|
Kensington
|
4.74- 0.90%
|
|
8.1.01
|
10 lac “
|
Luminant
|
3.23-0.90%
|
|
16.01.01
|
10 lac “
|
Kensington
|
3.42- 0.9012%
|
|
18.01.01
|
8.80 lacs
|
Kensington
|
3.54- 0.90076%
|
|
19.01.01
|
3 lac
|
Luminant
|
4.37- 1.12%
|
|
24.01.01
|
10 lacs
|
Luminant
|
3.56- 0.95%
|
|
30.01.01
|
10 lacs
|
Brentfield
|
1.41- 0.39%
|
|
30.01.01
|
5 lac
|
Wakefield
|
3.18- 0.89%
|
|
1.2.01
|
8.50 lacs
|
Kensington
|
3.31- 0.899%
|
|
2.3.01
|
20 lac
|
Panther Fincap
|
2.95 – 1.06%
|
|
1.3.01
|
10 lac
|
Panther Fincap
|
2.88- 0.96%
|
|
12.2.01
|
19 lakh shares
|
Luminant Investments
|
0.96%
|
d. It can be seen from the table mentioned above that varying rates of brokerage has been charged by CSFB in respect of the shares sold by the firm. The following instances further indicate that brokerage scales were reduced by CSFB depending on the proximity to the pay out date and financing transactions have taken place on a rampant scale during the above referred period.
|
Date of the Transaction
|
Brokerage percentage
|
No. of days to Pay out
|
Pay out date
|
Payment dates
|
|
20.02.01
|
0.90
|
8
|
28.02.01
|
20.02.01
|
|
23.02.01
|
0.87
|
7
|
02.03.01
|
23.02.01
|
|
01.03.01
|
0.96
|
8
|
09.03.01
|
01.03.01
|
|
02.03.01
|
1.07
|
10
|
12.03.01
|
02.03.01
|
e. The above indicates that as and when pay out date approaches, the brokerage scales are narrowed down indicating that financing transactions had taken place between these entities.
f. Therefore, it is concluded that the very purpose for such transactions were to create artificial volume in the scrip and manipulate the price of the same. In this process Panther; Luminant; Kensington; Wakefield and Brentfield were assisted by their broker CSFB through financing of their trades.
3.0 In this regard, it is noted that you, (i) Panther Fincap and Management Services Ltd., (ii) Classic Credit Ltd., (iii) Saimangal Invest Trade Ltd., (iv) Luminant Investments Pvt. Ltd., (v) Kensington Investments Ltd., (vi) European Investments Ltd., (vii) Wakefield Holdings Ltd. and (viii) Brentfield Holdings Ltd., had placed synchronized orders with your respective brokers in the scrip of MGL. You had also executed fictitious trades. Such trades were executed to deflate the price of the scrip and create artificial demand, thus market, for the scrip. From the very nature of transactions it is obvious that such transactions were not intended to effect transfer of beneficial ownership but intended to operate only as a device to cause fluctuation in the market price of the scrip of MGL. Further, Panther; Luminant; Kensington; Wakefield and Brentfield, were also assisted by broker CSFB through financing in their transactions. From the nature of transactions it appears that you had willingly manipulated in the scrip. Thus, you had violated regulation 4 (b) & (d) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 1995.
3.1 You are, therefore, directed to show cause as to why appropriate action should not be taken against you under section 11(4)(b) & 11B of SEBI Act, 1992. You are required to submit your reply along with the documents relied upon, if any, to the show cause notice within 21 days from the date of receipt of this notice.
3.2 However, if you fail to respond to this notice within the aforesaid period, it will be assumed that you have no explanation to offer and the undersigned will be constrained to proceed with the matter on the basis of the documents available. In your reply also indicate whether you desire to be heard in person before the undersigned.
3.3 SEBI, vide Circular no. EFD/ ED/ Cir-1/ 2007 dated April 20, 2007, (available at www.sebi.gov.in), has come out with guidelines for passing of consent orders. If you wish to avail the consent process, you may apply in the prescribed form given in the said Circular. Your application should be forwarded to the address mentioned in the said Circular under intimation to the undersigned.
Yours faithfully,
P. K. Bindlish
Encl.: (i) Price volume Data – Annexure A.
(ii) Price volume Chart – Annexure B.
(iii) Demat account statement of CSI Technology Ltd. – Annexure C.
(iv) Demat account statement of Mascon Information Technologies Ltd. – Annexure D.
(v) Details of trades (over 1,000 shares/ trade) – Annexure E.