SUNIL KUMAR KAYAN AND SANJAY BANSAL Vs. STATE
SECURITIES APPELLATE TRIBUNAL
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(1.) THE Order of the Court was as follows :
Sunil Kumar Kayan is a member of Calcutta Stock Exchange (CSE) operating under trade name Sunil Kumar Kayan & Co. and registered with as a stock broker (Regn. No. INB 03-06689-17) hereinafter referred to as the broker. Securities and Exchange Board of India (SEBI) had come across with information regarding alleged illegal trading in securities by the broker. THErefore an inspection of the broker was ordered by SEBI vide order dated August 13, 2003.
(2.) The inspecting officials visited office of the broker at 8, Lyons Range, Ground floor, Kolkata- 700 001 on August 14, 2003. The inspecting officials reported that they found three NSE trading terminals being operated in the premises of the broker though he is neither a member of NSE nor a sub-broker of any NSE member. Upon enquiry it was revealed that one of the trading terminals has been given to the broker by M/s GCM Securities Ltd., member NSE and other two trading terminals were given by Shri Sanjay Bansal, member Gauhati Stock Exchange and registered sub-broker of ISE Securities Ltd., member NSE. All the three trading terminals were unauthorized as no details had been provided by these NSE broker and sub-broker to NSE in this regard.
During the said visit by inspecting officials of the broker's office during trading hours, around 40 clients then present fled the premises immediately. Shri Sunil Kumar Kayan was not available in the office at that time. Smt. Sujata Kayan reportedly wife of Shri Sunil Kumar Kayan was present in the office at that time and she seemed to be managing the affairs of the broker.
(3.) THE major findings of Inspection are as follows:
- THE broker has taken unauthorized trading terminals from Shri Sanjay Bansal and M/s GCM Securities Ltd.
- THE broker has also extended unauthorized trading terminals to various persons/entities, as was apparent from the hand written note book and copies obtained by inspecting officials, which showed existence of his trading activities in other areas such as Burra Bazar and Burdwan.
- THE broker had ordered/ traded in certain scrips in quantities of one or two shares. A test check of such trading data of the broker revealed that such orders/trades constitute around 70% of his total orders/trades.
- Many such transactions (for buy/sell of one or two shares) entered into by the broker on his own account as well as on account of his wife/others were found to be squared off by end of the day. THE net amount receivable of the bills (of such transactions) was as little as 70 Paise to few rupees like Rs. 3.29 / Rs. 4.33, etc. Such instances are as under:
THE net bill amount appears to be rather unusual and it indicates a possibility of using the amount as a benchmark price which is arrived at by executing a small amount of order on the exchange while the large part of the order could have been executed illegally outside the exchange. Thus there is reasonable ground to believe that the broker is engaged in illegal trading outside the stock exchange.
- Handwritten /printed papers found in the broker's office by the inspecting authority showed that Sunil Kumar Kayan & Co. had transacted in Futures and Options segment also for his clients without a valid registration to transact in the F&O Segment of NSE. THE sauda confirmation slips obtained from the broker's office apparently showed that after entering into a contract for an official market lot, the broker had split the trades in less than official market lot among his various clients. Further, the trading terminal which is in operation in the office of the broker did not have the permission to trade in Futures and Options. THErefore, it appears that the sauda in Futures and Options were executed in off-market.
- THE trade details obtained from the broker's office showed transactions that did not have any NSE order numbers, trade number and trade time indicating that these transactions have been entered off the floor.
- Handwritten papers found in the broker's office showed cash received and paid from /to his clients and many such cash receipts /payments were beyond the limit permitted under Income Tax Act for cash transactions. Further SEBI rules also prohibit acceptance of cash by brokers from clients.
- A note book found in the broker's office apparently indicated record of turnover and difference amounts on daily basis.;
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