TaxTMI 
TaxTMI 
TaxTMI 
Under SEBI (Prohibition of Fraudulent and Unfair Trading Practices related to Securities Markets) Regulations 2003 ( “PFUTP Regulations,2003”).
From the website of SEBI relevant information have been collected from orders and analysed to find that the penalty levied on small innocent traders or investors are very high and arbitrary. In this case study
Noticee is Shri Ajay Kumar Baid to whom SCN/ show cause notice no. OIAE/IGRD/MJS/19733/2021 Dated 17th August 2021 was issued.
It has been mentioned in order of AO that after finality of enquiry for the above period appropriate action was initiated against 14, 720 entities in a phased manner and for this reason it is considered that SCN was issued within reasoanble time and is not time barred.
Broker was Giriraj Stock Broking Pvt. Ltd.
AO: ADJUDICATING OFFICER, SEBI who passed the order. ADJUDICATION ORDER NO.: OIAE/IGRD/AO/MS/GK/2021-22/15730 against which now noticee has preferred appeal before SAT.
ACT or SEBI Act: THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992.
Alleged counter party: Wonderland Paper Suppliers Private Limited
S/E or stock exchange: Bombay Stock Exchange / BSE
IP – Inquiry Period and subject matter:
Trading activities of certain entities in ISO, BSE , Derivatives alleged to be Illiquid, for period April 1, 2014 to September 30, 2015
SCN is after about seven years from last date of enquiry period. This should be considered barred by limitation by way of reasonableness.
SCN is for alleged violation of Regulations 3(a),(b),(c) and 4(1),4(2)(a) of regulations. The SCN is an omnibus notice not specifying any particular clause of provision alleged to be violated and amount of penalty intended to be levied.
There is no evidence that the noticee know and have direct or indirect relationship or any connection with the counterparty .
Amount of penalty levied has no basis. On consideration of volume of transactions of noticee , counter party and brokers, NIL penalty imposed on Brokers and amount of penalty imposed on Counter party the amount of penalty imposed on noticee is arbitrary , unjust and illegal.
- In the following table for the same Inquiry period (IP) and Inquiry matter details of trades and penalty in case of appellant, counter party and broker are summarized.
DESCRIPTION | IN CASE OF APPELLANT AJAY BAID | IN CASE OF COUNTER PARTY | In case of Giriraj Stock Broking (P) Ltd –Broker of Appellant |
SCN for Penalty proceeding under section And order | SCN Alleged violation of Regulations 3(a), (b), (c), (d), 4(1) and 4(2) (a) of PFUTP Regulations, 2003? Penalty levied for the violation of Regulations 3(a), (b), (c), (d), 4(1) and 4(2) (a) of the PFUTP Regulations | SCN Alleged violation of Regulations 3(a), (b), (c), (d), 4(1), 4(2)(a) of PFUTP Regulations? Penalty levied for violation of regulations 3(a), (b), (c) and (d), 4(1), 4(2)(a) of PFUTP Regulation | Under sections 11(1), 11(4) and 11B and |
DATE ORDER | 30.3.2022 | 25.02.2019 | Vide ad interim order dt. 17.02.2016 AO SEBI imposed some restrictions but that order was quashed and set aside by SAT vide order dt. 14.03.2016. so no penalty or penal action has been taken against brokers. |
Order no. | ADJUDICATION ORDER NO.: OIAE/IGRD/AO/MS/GK/2021-22/15730 | ADJUDICATION ORDER NO. EAD-9/ AO/SM/ 240 /2018-19] | WTM/RKA/ISD/ 25/ 2016 |
Number of trades | 1 buy and 1 sale with one counter party all alleged to be non-genuine | 100 trades out of which 92were alleged to be non-genuine | |
2 trades | 92 trades | ||
2,12,000 units | 14890000 units | ||
in one stock option | in 39 stock option | ||
Penalty imposed | Rs.5 lakh | Rs.7.20 lakh | Nil |
Security | FEDB15JUL125.00PEW4 | ||
Investigation matter and period | illiquid Stock Options segment at the BSE for the period April 01, 2014 to September 30, 2015 | trading activities of certain entities in ISO, BSE for period April 1, 2014 to September 30, 2015 | Trading in stock options segment for the period April 1, 2014 to March 31, 2015 |
Penalty per Trade work out | Rs.2,50,000 | Rs.7826 | NIL |
The above table shows arbitrariness in levy of penalty in case of noticee which is Rs.2,50,000/- per trade whereas Rs.7826/- per trade in case of the counter party. The Broker has been absolved of any charges and no penalty has been imposed on him and other brokers, as per information gathered.
It is also observed from orders of AO on website and SAT that in many cases, AO has not imposed any penalty in cases of SCN issued to similar noticee
This only shows case of harassment of self-employed small traders and investors like noticee.
Feed back and views of learned reades are welcome.