SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

           Whereas, Securities and Exchange Board of India ( hereinafter referred to as SEBI ) conducted an inspection of the books of accounts and other documents of Raj Overseas & Finance Pvt. Ltd., a sub-broker, Affiliated to ISE Securities & Services Ltd., Member-NSE (hereinafter referred to as “sub-broker”) into the alleged violations of provisions of Securities and Exchange Board of India Act, 1992 (hereinafter referred to as “SEBI Act”), Rules, Regulations and Circulars made there under. The inspection revealed various irregularities and violations including those of principal to principal trading and non segregation of client funds from its own funds; and

           whereas, an enquiry officer was thus appointed by SEBI under Regulation 5 of SEBI (Procedure for holding enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to as “Enquiry Regulations”) to enquire into the alleged contravention of SEBI Act, Securities Contract (Regulation) Rules, 1957, SEBI (Stock Brokers & Sub-Brokers) Regulations, 1992 (hereinafter referred to as “Broker Regulations”), SEBI (Stock Brokers & Sub-Brokers) Rules, 1992 (hereinafter referred to as “Broker Rules”), SEBI Circulars, and,

whereas, the Enquiry Officer after conducting the enquiry in terms of the Enquiry Regulations and while finding that in the facts and circumstances of the case and the reply by the sub broker, albeit the other charges against the sub broker can not sustain, concluded that the sub broker by undertaking Principal to Principal trade is guilty of violating the provisions of SEBI circulars SMDRP / Policy / Cir-32 / 99 dated September 14, 1999 and SEBI / SMD / MDP / CIR / 043 / 96 dated August 05, 1996. The enquiry officer also observed that the sub broker did not make segregation of client funds from its own funds and thus is guilty of violating the provisions of SEBI Circular No. SMD / SED / CIR / 93 / 23321 dated November 18, 1993; and therefore recommended a minor penalty of censure against sub broker vide his Enquiry Report dated October 29, 2004; and

whereas, a copy of the said Enquiry Report was forwarded to the sub broker along with a show cause notice dated February 07, 2005 advising it to show cause as to why action as may be considered appropriate should not be taken against it ; and

whereas, the sub broker replied to the said show cause notice vide its letter dated February 21, 2005 and interalia submitted that principal to principal trades were mainly in the shares which were not traded on NSE and shares sold by it were out of its own investments and not on behalf of any clients. The sub broker further submitted there was no communication from its broker about the prohibition in this regard. Regarding non segregation of client funds from its own funds, the sub broker submitted that this was due to ignorance and it has not misused client funds. It was also submitted that it has now been maintaining properly segregated clients Account and own Account and therefore, kind judgment may be taken; and

whereas, it is observed that the enquiry officer having considered these submissions, has recommended the minor penalty of censure against the sub broker.

Now, therefore,

I, having considered the nature and gravity of the charges established, the facts and circumstances of the case, the recommendations of the Enquiry Officer, the submissions made by the broker thereto, and the mitigating factors as explained above, while agreeing with the findings of the Enquiry Officer, in exercise of powers conferred under Section 19 of the SEBI Act , read with Regulation 13(4) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulation 2002, hereby censure Raj Overseas & Finance Pvt. Ltd., a sub-broker bearing registration No. INS230782836, affiliated to ISE Securities & Services Ltd., member-NSE and advise it to be careful in future in its dealings in the securities market and diligently adhere to the provisions of the SEBI Act,1992, the Regulations and Circulars made there under.

DATE : 28.12.2005

PLACE: MUMBAI

MADHUKAR

WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA