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of <h1>Stock broker's license suspension reduced to client ban for fraudulent trades</h1> <h3>SIC Stocks And Services (P.) Ltd. Versus Securities and Exchange Board of India</h3> SIC Stocks And Services (P.) Ltd. Versus Securities and Exchange Board of India - TMI Issues:Violation of SEBI Act, 1992 and related regulations leading to suspension of stock broker's registration for three months; Allegation of allowing fraudulent trades by a client; Failure to deliver contract notes within the specified timeframe.Analysis:Violation of SEBI Act and Regulations:The case involved the suspension of a stock broker's registration for three months due to violations of SEBI Act, 1992 and related regulations. The appellant was found in violation of Sections 12A(a), (b), and (c) of the SEBI Act, 1992, along with regulations from PFUTP Regulations and Stock Brokers Regulations. The violations were related to fraudulent and unfair trade practices in the securities market, including price manipulation and failure to issue contract notes promptly.Allegation of Allowing Fraudulent Trades:The investigation revealed that the client, Purshottam Khandelwal, engaged in fraudulent trades through the appellant, resulting in price manipulation of shares. Purshottam Khandelwal was found to be a significant contributor to manipulative trades within the Vishvas Group. The appellant was accused of allowing these fraudulent trades, including synchronized and circular trades, leading to price manipulation and significant deviations from the Last Traded Price.Failure to Deliver Contract Notes:Another violation highlighted in the judgment was the failure of the stock broker to deliver contract notes to the client within the required 24-hour timeframe after a trade. This failure to provide timely documentation to the client was considered as one of the grounds for the impugned order leading to the suspension of the registration.Judicial Analysis and Decision:Upon hearing both sides, the tribunal observed that the appellant could not have been unaware of the large-scale fraudulent trades executed by the client within a short period. The tribunal agreed with the observation that the appellant's actions went beyond lack of due diligence and amounted to aiding in fraudulent and manipulative trades. The tribunal referred to previous judgments in similar cases to determine the appropriate penalty.Final Decision:The tribunal partially allowed the appeal by setting aside the suspension of the license for three months. Instead, it directed that the appellant should not accept any fresh clients for a period of six months from the date of the order. The decision was based on a comparison with penalties imposed in similar cases involving fraudulent trading activities. The miscellaneous application seeking stay was deemed infructuous, and no costs were awarded in the judgment.
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