TaxTMI 
TaxTMI 
2023 (10) TMI 1502
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....e, SEBI initiated a detailed investigation relating to trading in stock options segment of BSE which was completed in the year 2018. The investigation findings revealed that of all trades executed in the stock options segment of BSE during the Investigation Period, 81.38% of the trades, that is 2,91,643 trades, were trades which involved a reversal of buy and sell positions by the clients and counterparties in a contract. The investigation revealed that 14,720 entities were involved in executing non-genuine trades in BSE's stock options segment during the investigation period. The proceedings initiated against the first set of 59 entities, vide the aforementioned Interim Order were disposed of vide final Order dated April 05, 2018, without any further directions, observing that the Adjudicating Officer shall continue the proceedings in accordance with the SEBI Act, 1992 (hereinafter referred to as the "SEBI Act") and SEBI (Procedure for Holding and Imposing Penalties by Adjudicating Officer) Rules, 1995 (hereinafter referred to as the "Adjudication Rules") and pass appropriate order on merits. It was also recorded therein that SEBI has decided to take appropriate action against all....
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....etime scheme for this class of person. The terms of settlement should be attractive so that it could attract the noticees/entities to come forward and settle the matter which will ameliorate the harassment of penalty proceedings to the noticees and at the same time would help to clear the backlog of these pending matters before various AOs". 7. Accordingly, SEBI introduced a Settlement Scheme i.e. SEBI Settlement Scheme, 2022 (hereinafter referred to as "Scheme 2022") in terms of Regulation 26 of the SEBI (Settlement Proceedings) Regulations, 2018 (hereinafter referred to as "Settlement Regulations"). The Scheme provided a onetime opportunity to the entities against whom proceedings had been initiated and appeals against the said proceedings are pending before any forum or authority. 8. I note that SEBI framed the Scheme in accordance with the provisions of the Settlement Regulations and issued a Public Notice dated August 19, 2022 about the Scheme and the modalities for availing the benefit of the Scheme. The Notice was also made available on the website of the BSE. The Scheme was initially kept open for a period of three months commencing from August 22, 2022 to November 21....
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..... 13. Subsequently, a letter dated August 25, 2022 was sent via SPAD/email to the Noticee inter-alia enclosing details of the reversal trades of the Noticee and summary of reversal trades of the Noticee. The Noticee was advised to file an application for settlement within the validity period of the scheme and payment of settlement amount had to be paid online. Further, the Noticee was intimated that if the facility under the SEBI Settlement Scheme, 2022 was not availed, the adjudication proceedings initiated vide the SCN would stand automatically revived and the proceedings would continue from the stage at which the said proceedings were kept in abeyance. The Noticee was also advised to file a reply within 30 days of receipt of the intimation. The aforesaid letter was duly served on the Noticee as per the duly signed SPAD card. 14. I note that the Noticee did not submit its reply to the SCN, despite grant of sufficient time. However, in the interest of natural justice, vide Hearing Notice (HN) sent vide digitally signed email dated March 15, 2023 the Noticee was granted an opportunity of personal hearing on March 29, 2023. The said email failed to be delivered to the Noticee.....
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....cee is liable for a levy of monetary penalty under Section 15HA of the SEBI Act and if yes, how much should be the penalty? 22. Before proceeding further, I would like to refer to the relevant provisions of the PFUTP Regulations as below: PFUTP Regulations 3. Prohibition of certain dealings in securities No person shall directly or indirectly- (a) buy, sell or otherwise deal in securities in a fraudulent manner; (b)use or employ, in connection with issue, purchase or sale of any security listed or proposed to be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of the Act or the rules or the regulations made there under; (c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange; (d)engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange i....
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....87586 44 30000 RLNF15MAR 400.00CE 08/09/2015 MANOJ JAIN (HUF) SARSWATI SALES PVT LTD 13:48:35. 110067 13:48:33 .937749 13:48:35 .110067 6 40000 FEDB15SEP5 0.00CEW2 08/09/2015 SARSWATI SALES PVT LTD MANOJ JAIN (HUF) 13:52:06. 001767 13:52:05 .908108 13:52:06 .001767 8.6 40000 FEDB15SEP5 0.00CEW2 24. I note from the table above, that the Noticee while trading in the contract of CENT15MAR580.00PE on March 16, 2015, executed one buy trade of 55500 units at the rate of INR 4 per unit at 12:50:47.564687 hrs from the counterparty, viz. KAUSTAV CONSTRUCTION PRIVATE LIMITED. Thereafter, at 12:50:53.257010 hrs, the Noticee sold 55500 units at the rate of INR 13 per unit to the same counterparty. The Noticee sold the units at a higher value and bought the units for a lower value, reversing the trade within a time difference of 06 seconds. I note that the Noticee's transactions i.e. one buy trade and one sell trade took place on the same day and the order time for the two trades were placed by the Noticee and the counterparty in a difference of split seconds. The other transactions were executed by the No....
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..... Nobody intentionally trades for loss. An intentional trading for loss per se, is not a genuine dealing in securities. The platform of the stock exchange has been used for a non-genuine trade. Trading is always with the aim to make profits. But if one party consistently make loss and that too in pre-planned and rapid reverse trades, it is not genuine; it is an unfair trade practice." (Paragraph No. 35 of the part of the judgement authored by His Lordship Mr. Justice Kurian Joseph). Their Lordships have considered similar transactions in the same segment, "The repeated reversals and predetermined arrangement to book profits and losses respectively, made it clear that the parties were not trading in the normal sense and ordinary course. Resultantly, there has clearly been a restriction on the free and fair operation of market forces in the instant case." (Paragraph No. 38 authored by His Lordship Mr. Justice Kurian Joseph) " ....The stock market is not a platform for any fraudulent or unfair trade practice. The field is open to all the investors. By synchronization and rapid reverse trade, as has been carried out by the traders in the instant case, the price discovery system i....
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...., selling or otherwise dealing in securities in a fraudulent manner. Under Regulation 4(2) dealing in securities shall be deemed to be fraudulent if the trader indulges in an act which creates a false or misleading appearance of trading in the securities market. It is a deeming provision. Such trading also involves an act amounting to manipulation of the price of the security in the sense that the price has been artificially and apparently prefixed. The price does not at all reflect the value of the underlying asset. It is also a transaction in securities entered into without any intention of performing it and without any intention of effecting a change of ownership of such securities, ownership being understood in the limited sense of the rights of the contract." ( per His Lordship Mr.Justice Kurian Joseph's findings in paragraph Nos. 39&40). 32. The Hon'ble Appellate Tribunal has summarized the circumstances identified by the Apex court in Rakhi Trading Judgment in the case of Global Earth Properties and Developers Pvt. Ltd. Vs Securities and Exchange Board of India (Appeal No.212 of 2020 decided on September 14, 2020). In para 14 of the said order, the Hon'ble SAT enlisted th....