Appeal No. 46 of 2014. Case: Angel Broking Private Limited Vs Securities and Exchange Board of India. Securities and Exchange Board of India

Case NumberAppeal No. 46 of 2014
CounselFor Appellant: Somasekhar Sundaresan, Abishek Venkataraman and Arti Raghavan, Advocates and For Respondents: Kumar Desai and Pulkit Sukhramani, Advocates
JudgesJ.P. Devadhar, J. (Presiding Officer) and A.S. Lamba, Member
IssueSecurities And Exchange Board of India Act, 1992 - Sections 15HA, 15HB
Judgement DateOctober 01, 2014
CourtSecurities and Exchange Board of India


A.S. Lamba, Member

  1. The present appeal has been preferred by Angel Broking Private Limited (ABPL), formerly Angel Broking Limited, (referred to hereinafter as "Appellant") against Order number BM/AO-169-170/2013 dated December 30, 2013 of Ld. Adjudicating Officer (AO), Securities and Exchange Board of India (SEBI for short), for imposition of penalty of Rs. 10 lac on ABPL under Section 15HA of Securities and Exchange Board of India Act, 1992 (SEBI Act for short) for violation of Regulation 3(a), 4(1) and 4(2)(a), (b), (e) and (g) of Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations for short), Rs. 10 lac on ABPL under Section 15HB of SEBI Act for violation of Regulation 7 read with Clause A(1), A(3), A(4) and A(5) of Code of Conduct for Stock Brokers under Securities and Exchange Board of India (Stock-Brokers and Sub-Brokers) Regulations, 1992 (Stock-Brokers Regulations for short) and imposition of penalty of Rs. 10 lac on AIPL under Section 15HA of SEBI Act for violation of Regulation 3(a), 4(1) and 4(2)(a), (b), (e) and (g) of PFUTP Regulations.

  2. SEBI investigated trading in scrip of Sterling Green Wood Limited (SGWL or company, for short) from November 6, 2009 to December 2, 2009 (IP for short), during which price of scrip of SGWL increased from Rs. 19.80 as on November 6, 2009 to Rs. 42.50 as on December 31, 2009, with average daily volume of 69,776 shares.

  3. From shareholding pattern of SGWL, it is seen that ABPL was holding more than 1% shares of SGWL as on September 30, 2009. AIPL was the holding company of ABPL; although AIPL was also acting as broker for proprietary trading account of Angel Group,-which comprised ABPL, AIPL, Angel Capital and Debt Market Limited and Angel Commodities Broking Private Limited. AIPL - a client of ABPL - was found to be executing self trades in scrip of SGWL during IP and executed 1 (one) self trade on November 30, 2009 and 3 (three) self trades on December 1, 2009 and traded 9,866 shares in these 4 self trades, where broker and counter party brokers for self-trades was ABPL. It is alleged that ABPL consciously executed self-trades for its client AIPL and hence ABPL connived with AIPL for these self trades.

  4. A Show Cause Notice (SCN) was issued by Ld. AO to Appellant vide letter dated July 15, 2013 and Appellant made following relevant submissions before Ld. AO:

    • Basic nature of AIPL's activity was jobbing/arbitrage, which is undertaken through a network of around 70 dealers and all these 70 dealers place orders through single client code viz. M888, while using 156 terminals.

    • Regarding alleged self trades by AIPL, it has been submitted by AIPL that multiple dealers traded based on their individual outlook of market/stock and that traders buy/sell stocks based on their bullish/bearish view and it is possible that while one dealer may place buy order for a scrip, while another dealer place sell order for same scrip and hence alleged self-trades are purely coincidental and not outcome of any design and hence such trades may appear self-trades on consolidated basis, but are separate and independent trades at individual level.

    • Regarding alleged self trade of November 30, 2009 in which 193 shares were matched-, it is submitted that buy trade was from terminal number 553 and sell trade from terminal no. 556; which implies jobbing activity, wherein, more than one dealer carried out this trade. It is further submitted that the two dealers had placed buy quantity at 500, while sell quantity was 400, but only 193 shares got traded and these orders were placed during "Post Closing Period", when all trades get executed at a uniform closing price and this could be no intentional or manipulated trade.

    • Regarding trade of December 1, 2009, wherein 323 shares got matched and traded, BOQ for 1000 shares was placed at 10:09:34, out of which 52 got traded at Rs. 40.25 at 10:09:45 and 625 got traded at Rs. 40.25 at 10:14:43; then leaving pending order of 323 shares. Thereafter the dealer (presumably the same who had placed buy order for 1000 shares) sensed reverse price movement, placed sell order for 1000 shares at 10:23:29, believing that earlier buy order had got executed. 323 shares from previous pending buy order got matched with 323 (out of 1000) sell order, resulting in self trade, which was not fraudulent or malafide.

    • In respect of balance two trades of December 1, 2009 - in which 9350 shares matched - these two trades need to be seen jointly - not separately - since three dealers using three terminals placed order for 5000 shares sale from terminal 546 at 15:06:53, order for 5000 shares from terminal no. 377 at 15:12:15; while buy order for 45,000 was placed from terminal 551 at 15:19:59, respectively. Out of buy order for 45,000 shares, 9350 got executed internally and rest got executed from market. Large time gap in three order placement may be noted.

    • Fact of ABPL holding more than 1% shareholding in SGWL as on September 30, 2009, may not be taken the basis of showing relation between the two. ABPL, being a broking company, held these shares in fiduciary capacity in pool account to met settlement obligations; hence this does not establish any connect in trading of the scrip. It has been submitted that ABPL or its associates are not, directly or indirectly, connected with SGWL.

    • AIPL carried out jobbing transactions as in its normal course of business, while ABPL, as a stock broker facilitated in executing the trades on exchange platform. The alleged trades were executed at real prevailing market price and do not create misleading appearance of trading which tampers/manipulates price discovery mechanism at stock exchange. No undue gain or unfair advantage accrued to AIPL, nor, any resultant artificial volume was created as a result of trades covered by Appellant.

    • Appellant was...

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