SEBI Vs. D AGARWAL AND CO
SECURITIES APPELLATE TRIBUNAL
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A.K. Batra, Whole Time Member -
(1.) M/s D Agarwal & Co. is registered with SEBI as a stock broker (hereinafter referred to as 'the member') bearing SEBI registration no. INB 120318311 and is a member of Ludhiana Stock Exchange (LSE). The member is a proprietary concern and Smt. Deepti Agarwal is the proprietor of the said member. An inspection of books of accounts, documents and other records of the member was conducted on 16.01.2001. During the inspection, several irregularities were found committed by the member.
(2.) The findings of the inspection were forwarded to the member vide letter dated 05.03.2001 advising the member to give its comments, if any. The member vide letter dated 20.04.01 replied to the said findings of the inspection report. On not being satisfied with the reply filed by the member an Enquiry officer was appointed vide order dated 22.01.2003 to enquire into allegations of violations against the member, inter alia, of:
(a) Violation of section 12 of Securities and Exchange Board of India Act, 1992
(b) Violation of Rule 3 & 4 (b) of the SEBI (Stock Brokers and Sub-Brokers) Rules 1992.
(c) Violation of Clause A (5) & B (1) of the Code of Conduct as specified in Schedule II read with Regulation 7 of SEBI (Stock Brokers & Sub brokers) Regulations, 1992
(d) Violation of the Directives issued by SEBI vide circular nos. SMD/MDP/CIR/043/96 dated 05/08/96, SMD/POLICY/IECG/1-97 dated 11/02/97, SMD/POLICY/CIR/5-97 dated 11/04/97, SMD/(B)/104/22775/93 dated 29/10/93, SMD/SED/CIR/93/23321 dated 18/11/93, SMD/POLICY/CIR-3/98 dated 16/01/98, SMDRP/POLICY/CIR/32-99 dated 14/09/99, SMD/RCG/CIR/(BKG)/293/95 dated 14/03/95, SMDRP/POLICY/CIR-11/99 dated 07/05/99;
(e) Rules, regulations, bye-laws and directives of LSE as amended from time to time.
The Enquiry Officer submitted her report on 18.07.2003. The Enquiry Officer taking into account the irregularities that have been established recommended suspension of certificate of registration of the member for a period of 1 month. The Enquiry Officer held the member guilty of the following violations:
(a) Irregularities in issuance of Contract Notes. The Contract Notes did not contain pre-printed serial number. Order time not mentioned on Contract Notes.
(b) Non-segregation of own funds vis-ï¿½-vis clients funds
(c) Dealing as unregistered sub-broker
(d) Non-maintenance of client database
(e) Transaction with clients on principal to principal basis
(f) Non-reporting of off the floor transactions
(3.) CONSEQUENT upon above, in terms of regulation 13(2) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (hereinafter referred to as 'the said regulations') a show cause notice dated 29.07.2003 was issued to the member to show cause as to why the penalty as recommended by the enquiry officer should not be imposed on them. The member was advised to submit his reply, if any, within 15 days of the receipt of the show cause notice failing which it would be presumed that the member has no explanation to offer. The member was also asked to intimate along with the reply whether it desired a personal hearing. The member vide letter dated 19.08.2003 replied to the show cause notice dated 29.07.2003. The member made the following submissions:
(a) That as per the guidelines of SEBI, a Stock Broker cannot do any other business other than securities business. In case registration is suspended for one month, it would be left with no source of Income during the said period and would be deprived off its right to cash.
(b) That since it has already started complying with all the violations observed by SEBI Inspection team, the member requested to take a lenient view.;
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