Appeal No. 399/2004. Case: Atul Kanodia and Co. Vs Securities and Exchange Board of India. Securities and Exchange Board of India
| Case Number | Appeal No. 399/2004 |
| Counsel | For Appellant: Bharat Merchant, Adv. And For Respondents: V.N. Shingnapurkar, Adv. |
| Judges | Kumar Rajaratnam, J. (Presiding Officer) |
| Issue | Securities and Exchange Board of India Act, 1992 - Section 15A, 15AC, 15F, 15FA and 15HB; Securities and Exchange Board of India (Procedure for Holding Enquiry and Imposing Penalty by Adjudicating Officer) Rules, 1995; Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992 - Regulatons 15, 16, 17, 17(1), 26, 26... |
| Citation | 2005 (61) SCL 189 (SAT) |
| Judgement Date | May 11, 2005 |
| Court | Securities and Exchange Board of India |
Judgment:
Kumar Rajaratnam, J. (Presiding Officer)
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Appeal is taken up with consent of parties.
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The appellant is a sub-broker registered with SEBI and affiliated to UPSE Securities Ltd. and is a member of the Stock Exchange, Mumbai. An enquiry was conducted by a chartered accountant on behalf of SEBI into the accounts of the appellant for the financial year 2000-2001 to 2002-2003. The report of the chartered accountant observed the following defects in the working of the appellant.
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Failed to maintain books of account
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Failed to appoint compliance officer
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Delayed payment of monies/deliveries of securities to clients
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Failed to maintain client database
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Failed to issue confirmation memos in the form and manner prescribed
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Failed to maintain proper segregation of client funds and own funds
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Associated with other business
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Not adhered to the unique client code
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Failed to comply with directions issued by the Board
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Not exercised due skill, care and diligence
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On the basis of the report of the chartered accountant an enquiry was commenced under the provisions of SEBI (Procedure for Holding Enquiry and imposing Penalty by Adjudicating officer) Rules, 1995. The adjudicating officer ultimately confined his finding to three defects which are extracted from the impugned order and reads as follows:
"1. Failed to maintain books of account
Inspection Report - The Member did not produce Margin Register, Order Book and Dak Register
Reply of M/s. Atul Kanodia:- We maintained the Margin Register. With regard to Order book they replied
With regard to Dak Register they replied
"Since all statutory requirements have been timely submitted before the appropriate authority and there is no compliant on account of non submission by any authority, charge of non maintenance of Dak Register is baseless. Hence you will appreciate that there is no violation of any Regulation on our part.:
Non-maintenance of Order Book and Dak Register is violation of Section 15A(c) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the "Act") read with Regulation 26 (iii) of SEBI (Stock Brokers and Sub-brokers) Regulations, 1992 (hereinafter referred to as the "Regulations")
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Confirmation notes
Inspection Report - the confirmation report, issued by the sub-broker were not having pre-printed serial No., order placement time/time stamping.
Reply of M/s. Atul Kanodia: - Maintenance of confirmation notes is mandatory for a broker, not for a sub-broker the said is not applicable to us.
Non-maintenance of confirmation notes in the form and manner prescribed is violation of Section 15F(a) and 15HB of the Act read with Regulation 26(v), 26(xv) and 26(xvi) of the Regulations:
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Unique Client Code
Inspection Report - Unique client codes have not been recorded
Reply M/s. Atul Kanodia - No specific observation had been made by the Inspecting Authority
Non-maintenance of unique client codes is...
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