Securities Appellate Tribunal overturns suspension of stock brokers' registration certificates

The Securities Appellate Tribunal allowed the appeals in Appeals No. 164 and 165 of 2009, setting aside the suspension of the registration certificates of two stock brokers accused of violating securities trading regulations. The Tribunal found that the brokers' trades were transparent, delivery-based, and in accordance with SEBI's circular, thus not breaching the regulations. The judgment emphasized that the brokers had not violated the code of conduct, directing each party to bear their own costs.

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Issues involved: Securities trading regulations, violation of trading practices, suspension of registration certificates.

Summary:
The judgment by the Securities Appellate Tribunal in Appeals No. 164 and 165 of 2009 involved the issue of alleged violations of securities trading regulations by two stock brokers acting on behalf of Unit Trust of India (UTI) in the purchase of shares. The brokers were accused of executing structured and cross deals, leading to artificial volumes in the market. The Securities and Exchange Board of India (SEBI) initiated proceedings against them under Regulation 6(1) and Regulation 4 of the relevant regulations. The brokers denied the allegations, but after an enquiry, their registration certificates were suspended for one and two months, respectively.

Upon hearing the case, the Tribunal found that the trades executed by the brokers were negotiated deals between UTI and the sellers, conducted through the trading system of the stock exchange. The Tribunal noted that the circular issued by SEBI allowed negotiated deals to be executed on the exchange's screens in the price and order matching mechanism. As long as the trades were transparent and contributed to price discovery, they were considered valid. The Tribunal concluded that the brokers' actions were in accordance with the circular and did not violate the regulations. Additionally, the trades were delivery-based and not speculative, further supporting the brokers' compliance with the rules.

Therefore, the Tribunal allowed the appeals, setting aside the suspension of the registration certificates. The judgment emphasized that since the trades were legal and in line with SEBI's circular, the brokers had not breached the code of conduct. The parties were directed to bear their own costs.

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