Adjudication Order No. NP/JS/AO/19/2017. Case: In Re: Kaynet Capital Ltd. Vs. Securities and Exchange Board of India

Case NumberAdjudication Order No. NP/JS/AO/19/2017
Party NameIn Re: Kaynet Capital Ltd. 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. Parsavnath Developers Limited (Parsvanath), 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. 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, yet the stock price in case of all these four companies fell sharply within few minutes on July 26, 2012. The sharp fall in price happened within a short time span.

  2. Investigation revealed that that price of Parsvanath 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. Investigation also revealed that on July 26, 2012 the price of the stock of Parsvanath fell sharply and one M/s. Kuvam Plast Pvt. Ltd. sold large quantity of 17,799 shares which accounted for 3.29% of total Market Volume on NSE. On being questioned the reasons for the impugned trade Kuvam Plast Private Limited stated in its reply to the investigation team that orders for the impugned trades were unauthorized and placed by their stock broker Kaynet Capital Limited(noticee, hereinafter). The noticee, stated that orders were placed at the request of Kuvam Plast Pvt. Ltd., however, it was alleged that the noticee executed unauthorized trades in the account of M/s. Kuvam Plast Pvt. Ltd., which was in violation of Regulations 4(1) and 4(2) (m) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003. It was alleged that the noticee was involved in fraudulent transactions in the scrip of Parsvanath and did not inform its client of the same. As also, the noticee failed to exercise due skill and care while dealing with its client. The notice, therefore, failed to adhere to Clauses A (1), A (2) and B (1) of the Code of Conduct for stock Broker as specified under Schedule II read with Regulation 9 of SEBI (Stock Broker and Sub broker) Regulations, 1992.

    APPOINTMENT OF ADJUDICATING OFFICER

  3. 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...

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