BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA

Transcription

1 BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA [ADJUDICATION ORDER NO. IVD-ID7/AL- RG/AO/DRK-AKS/EAD3-394/ ] UNDER SECTION 15 I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5(1) OF SECURITIES AND EXCHANGE BOARD OF INDIA (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 Against: Shri Rajeev Gupta 203 Gupta Arcade Shresth Vihar Market New Delhi PAN No. AFYPG0628M FACTS IN BRIEF 1. Securities and Exchange Board of India (hereinafter referred to as SEBI ) carried out an investigation in the scrip of Alchemist Ltd. (hereinafter referred to as Alchemist ) for the period July 17, 2008 to September 30, 2008 (hereinafter referred to as investigation period ) to ascertain any violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (hereinafter referred to as PFUTP Regulations ) by the group of entities at National Stock Exchange of India Ltd. (hereinafter referred to as NSE ). During the investigation period the scrip opened at ` on and closed at ` on after touching high of ` Page 1 of 7

2 APPOINTMENT OF ADJUDICATING OFFICER 2. I was appointed as the Adjudicating Officer and the same was communicated vide proceedings of the Whole Time Member appointing Adjudicating Officer dated under Section 15 I of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as SEBI Act ), read with Rule 3 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as Adjudication Rules ) to inquire into and adjudge under Section 15 HA of the SEBI Act the violation of Regulations 3 (a), (b), (c), (d), 4 (1), (2), (a) and (g) of PFUTP Regulations alleged to have been committed by Shri Rajeev Gupta (hereinafter referred to as noticee ). SHOW CAUSE NOTICE, HEARING AND REPLY 3. A Show Cause Notice (herein after referred to as SCN ) dated was served on the noticee by Registered Post Acknowledgement Due in terms of the provisions of Rule 4 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995 requiring him to show cause as to why an inquiry should not be held against him and why penalty, if any, should not be imposed on him under Section 15 HA of the SEBI Act. In the said SCN, it was alleged that the noticee has executed self trades in the scrip which has led to creation of false and misleading appearance of trading in the scrip and hence is fraudulent in nature. 4. The noticee vide his letter dated requested for detailed trade log. Vide letter dated noticee was again provided the relevant trade log which was already provided to him along with the SCN. Further, the noticee was granted additional 10 days time to submit a reply to the SCN. The said letter was sent to the noticee vide also. Page 2 of 7

3 5. Vide personal hearing notice dated , the noticee was granted an opportunity of hearing at SEBI Northern Regional Office, New Delhi on In response to this the noticee vide his dated confirmed his appearance for the scheduled hearing. However, vide his dated , noticee requested for an adjournment for the scheduled hearing as his grandfather was hospitalized. It is noted from our records that the hearing notice dated which was sent via Speed Post Acknowledgement Due (herein after referred to as SPAD ) came back undelivered with remark unclaimed. 6. A final hearing notice dated was served on the noticee vide SPAD and dated granting him an opportunity of hearing on at SEBI Bhavan, Mumbai. Further, the noticee was advised to submit a reply to the SCN by Proof of service of the notice is on record. The said hearing notice was also affixed at the last known address of the noticee. However, the noticee failed to attend the hearing without providing any reason. 7. From the records it is noted that the noticee has neither replied to the SCN nor has attended the personal hearings granted to him inspite of service of the notices as stated above. It is noted that the proof of service of the notices are on record. In the light of this fact, I am convinced that the Principles of Natural Justice have been complied with and I am compelled to pass an exparte order against the noticee based on the material made available on record. CONSIDERATION OF EVIDENCE AND FINDINGS 8. I have taken into consideration the facts and circumstances of the case and the material made available on record. The issue in the present matter is whether the noticee had executed self trades while trading in the scrip at NSE. Page 3 of 7

4 9. Self trades are trades in which both the buyer and the seller are the same entity resulting in no change in beneficial ownership. It is observed from the investigation report (herein after referred to as IR ) that the noticee had executed 12 self trades on 3 days for 2,638 shares. On one day i.e. on the noticee had executed 10 self trades for 1,550 shares. It is observed from the Order Log Trade Log that all 10 trades were executed around 10:58 am and the time difference between placing of the sell order and the buy order was within a gap of 15 minutes. 10. In this case, it becomes necessary to quote the order of the Hon ble Securities Appellate Tribunal (hereinafter referred to as SAT ), in Chirag Tanna Vs The Adjudicating Officer dated wherein it was held as follows:..we have on record the trade and order logs from which it has been pointed out by the learned counsel for the respondent Board that the appellant had executed self trades i.e. trades in which he was both the buyer and the seller. Such trades are, admittedly, fictitious and create artificial volumes in the traded scrip Also the Hon ble SAT, in Triumph International Finance Ltd Vs. Securities and Exchange Board of India dated , held as follows:..the buyer and the seller were also the same. It is obvious that these trades were fictitious to which the appellant was a party. They were fictitious because the buyer and the seller were the same In view of the above facts and circumstances and in the absence of any reasonable explanation, it can be concluded that the noticee has violated Regulations 3 (a), (b), (c), (d), 4 (1), (2), (a) and (g) of PFUTP Regulations. The text of the said provisions are as follows: Page 4 of 7

5 SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, Prohibition of certain dealings in securities No person shall directly or indirectly (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under. 4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely: (a) indulging in an act which creates false or misleading appearance of trading in the securities market; (g) entering into a transaction in securities without intention of performing it or without intention of change of ownership of such security; 13. The said violations attract penalty under Section 15HA of the SEBI Act which provides that: 15HA. Penalty for fraudulent and unfair trade practices- If any person indulges in fraudulent and unfair trade practices relating to securities, he shall be Page 5 of 7

6 liable to a penalty of twenty-five crore rupees or three times the amount of profits made out of such practices, whichever is higher. 14. In this regard, the provisions of Section 15J of the SEBI Act and Rule 5 of the Rules require that while adjudging the quantum of penalty, the adjudicating officer shall have due regard to the following factors namely; a. the amount of disproportionate gain or unfair advantage wherever quantifiable, made as a result of the default b. the amount of loss caused to an investor or group of investors as a result of the default c. the repetitive nature of the default 15. The IR has not quantified any gain or unfair advantage accrued to the noticee as a result of noticee s self trades. Further, there is no material is made available on record to assess the disproportionate gain or unfair advantage and amount of loss caused to an investor or group of investors as a result of noticee s violation. 16. In view of the abovementioned conclusion and after considering the factors under Section 15J of the SEBI Act, I hereby impose a penalty of ` 50,000/- (Rupees Fifty Thousand only) on the noticee under Section 15HA of the Securities and Exchange Board of India Act, 1992 which is appropriate in the facts and circumstances of the case. ORDER 17. In exercise of the powers conferred under Section 15 I of the Securities and Exchange Board of India Act, 1992, and Rule 5 of Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, I hereby impose a penalty of ` 50,000/- (Rupees Fifty Thousand only) on Shri Rajeev Gupta in terms of the provisions of Section 15HA of the Securities and Exchange Board of India Act 1992 for Page 6 of 7

7 the violation of Regulations 3 (a), (b), (c), (d), 4 (1), (2), (a) and (g) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, In the facts and circumstances of the case, I am of the view that the said penalty is commensurate with the violations committed by the noticee. 18. The penalty shall be paid by way of Demand Draft drawn in favour of SEBI Penalties Remittable to Government of India payable at Mumbai within 45 days of receipt of this order. The said demand draft shall be forwarded to Chief General Manager- ID-7, Securities and Exchange Board of India, Plot No. C4-A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai In terms of the provisions of Rule 6 of the Securities and Exchange Board of India (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules 1995, copies of this order are being sent to Shri Rajeev Gupta having PAN No. AFYPG0628M and also to the Securities and Exchange Board of India, Mumbai. Place: Mumbai Date: September 6, 2013 D. RAVI KUMAR CHIEF GENERAL MANAGER & ADJUDICATING OFFICER Page 7 of 7