TaxTMI 
TaxTMI 
2012 (7) TMI 1054
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellant guilty of violating the provisions of regulations 4(b) and (d) of the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1995 (FUTP Regulations) and clauses A(2) and (3) of the Code of Conduct prescribed for the stock brokers in Schedule II under Regulation 7 of the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 (stock brokers regulations). 2. The facts of the case, in brief, are that, the appellant is a stock broker registered with the Securities and Exchange Board of India and is carrying on activities of stock broking since 1999. In and around June, 2001, the Board conducted investig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ermediaries) Regulations, 2008 (the intermediary regulations) calling upon it to show cause as to why its certificate of registration should not be suspended or cancelled and why any other action as provided under the said regulations may not be taken. The appellant replied to the show-cause notice vide its letter dated October 20, 2008, denying the allegations. An enquiry was held against the appellant and the designated authority, by its report dated July 21, 2009, recommended that certificate of registration of the appellant be suspended for a period of two weeks. A copy of the report was made available to the appellant vide letter dated August 31, 2009. The appellant again denied the charges by its letter dated A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in rampant manipulation of price and volume of the scrip of the company. The whole time member, after considering the material on record, has come to a definite finding that there is no nexus of the appellant or his clients with Ketan Parekh and the entities related to him. It has been specifically observed by him that the inference about the nexus is not supported by any proof and in the absence of the same, it is difficult to conclude that the noticee was aware of the counter party clients/brokers for the trades of its clients. The only other charge, which according to the whole time member stands proved, is that the trades of the appellant were being matched in a synchronized manner and that it had executed cross trades.&nb....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... three months and there is no allegation that it affected the price of the scrip. It is an admitted position that synchronized trades per se are not illegal. It is only when synchronized trades are executed with a view to manipulate the price of the scrip that the provisions of the FUTP Regulations will get attracted. All these trades were executed on behalf of the clients and no action is said to have been taken by the Board against these clients. In view of the foregoing discussions, we are of the view that in the facts and circumstances of this case, the charge of violating the provisions of regulations 4(b) and (d) of the FUTP Regulations is not made out. 4. The appellant has also been found guilty of vi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ulge in manipulative, fraudulent or deceptive transactions or schemes or spread rumours with a view to distorting market equilibrium or making personal gains. .................................." Since we have come to the conclusion that the charge of violating FUTP Regulations is not made out, the charge of violating clause A(3) of the code of conduct also fails. Due care and diligence as contemplated in the regulations governing code of conduct of brokers can be due care and diligence as expected of a prudent broker operating in the normal circumstances of the market. The whole time member has not brought out any instance of due skill and....