Adjudication Order No. NP/JS/AO/18/2017. Case: In Re: Edelweiss Securities Limited Vs. Securities and Exchange Board of India

Case NumberAdjudication Order No. NP/JS/AO/18/2017
Party NameIn Re: Edelweiss Securities Limited Vs
JudgesNagendraa Parakh, Adjudicating Officer
IssueSecurities And Exchange Board Of India Act, 1992 - Sections 15HA, 15HB
Judgement DateJanuary 31, 2017
CourtSecurities and Exchange Board of India

Order:

Nagendraa Parakh, Adjudicating Officer

FACTS OF THE CASE IN BRIEF

  1. SEBI conducted investigation in the matter of trading activities of certain entities in the shares of M/s. Pipavav Defence & Offshore Engineering Company Ltd. (Pipavav, hereinafter), M/s. Parsvnath Developers Limited (Parsvnath), Glodyne Technoserve Limited (Glodyne) and M/s. Tulip Telecom Limited (Tulip), all of which are listed at both BSE and NSE. The stock price of all these companies witnessed sharp and quick fall on both NSE and BSE on July 26, 2012 Although there was no corporate announcement/price sensitive information disclosed to the stock exchanges by the above mentioned four companies, which would have impacted the share prices of these scrips negatively, the stock price in case of all these four companies fell sharply within few minutes on July 26, 2012.

  2. Investigation revealed that that price of Parsvnath decreased from Rs. 61.50/- to Rs. 57.75/- during period prior to Investigation period and from Rs. 57.30/- to Rs. 46.25/- on July 26, 2012 (Rs. 11.05/- or 19.28% decrease from opening price). On July 26, 2012, Sensex moved from 16887.84 to 16639.82 and Nifty moved from 5126.30 to 5043. Gajria Jayna Precision Industries Limited (Gajria, hereinafter), having PAN AABCG5915, was among the top selling client on NSE. Gajria, being the client of Edelweiss Securities Ltd., (hereinafter referred to as the noticee) sold 1,58,557 shares of Parsvanath on NSE on July 26, 2012 which constituted 29.29% of trading volume on NSE on that day.

  3. The noticee, while replying to SEBI about their trades stated that the orders for the impugned trades were placed on oral instructions of the authorised person (Amit Sansanwal) and same were confirmed on July 27, 2012 by the authorised person through Email. In this regard, the investigation report of SEBI observed that Gajria authorised Mr. Amit Kumar (director) to place orders on its behalf, however, trades were confirmed by Amit Sansanwal. It was observed that orders were confirmed by Amit Sansanwal whereas person authorized by Gajria was Amit Kumar. The noticee, therefore, was alleged to have done unauthorized transactions in the scrip of Parsvanath and did not inform the client Gajria of the same in violation of Regulation 4(1) and 4(2) (m) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003 and noticee also failed to exercise due skill and care while dealing with its client in violation of Clause A(1), A(2) & B(1) of the Code of Conduct as prescribed under Schedule II read with Regulation 9 of SEBI (Stock Broker and Sub broker) Regulations, 1992.

    APPOINTMENT OF ADJUDICATING OFFICER

  4. Shri Jayanta Jash, Chief General Manager, SEBI, vide an order of Whole Time Member, SEBI, dated July 08, 2014, was appointed as the Adjudicating Officer to inquire into and adjudge under Section 15HA & 15HB of the SEBI Act, 1992 and Rule 3 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995, for the alleged violations of provisions under Clauses A(1), A(2) and B(1) of the Code of Conduct for Stock Brokers as specified under Schedule II read with Regulation 9 of SEBI(Stock Brokers and Sub Brokers) Regulations, 1992 and Regulation 4(1) and 4(2)(m) of SEBI(Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003(PFUTP, hereinafter) by M/s. Edelweiss Securities Limited having PAN AAACK3792N (hereinafter referred to as noticee). Subsequently, vide order dated 28th October, 2015, Shri S.V. Krishnamohan, Chief General Manager, was appointed Adjudicating Officer to enquire into and adjudge under Section 15HA & 15HB of the SEBI Act, 1992. Vide the internal noting of the Whole Time Member, SEBI, dated December 14, 2015, the undersigned was appointed as Adjudicating officer to adjudge the matter.

    SHOW CAUSE NOTICE (SCN), REPLY AND PERSONAL HEARING

  5. The noticee was issued a show-cause notice, dated February 26, 2016 and a copy of the...

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