SEBI Vs. VKB CAPITAL SERVICES LTD
SECURITIES APPELLATE TRIBUNAL
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A.K. Batra, Whole Time Member -
(1.) VKB Capital Services Ltd. is registered with SEBI as a stock broker (hereinafter referred to as 'the member') bearing SEBI registration no. INB 120756233 and is a member of Ludhiana Stock Exchange (LSE). An inspection of books of accounts, documents and other records of the member was conducted on 15.01.2001. 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 20.02.2001 advising the member to give their comments, if any. The member vide letter dated 22.05.01 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 07.01.2003 to enquire into allegations of violations against the member, inter-alia, to the following:
(a) Violation of section 12 of Securities and Exchange Board of India Act, 1992
(b) Clause (1) (g) of Rule 15 of Securities Contracts (Regulation) Rules, 1957.
(c) Violation of Rule 3 & 4 (b) of the SEBI (Stock Brokers and Sub-Brokers) Rules 1992.
(d) Sub-Regulation (1) (g) of Regulation 17 of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992
(e) Violation of Clause A (5), B(1) & C(4) of the Code of Conduct as specified in Schedule II read with Regulation 7 of SEBI (Stock Brokers & Sub brokers) Regulations, 1992
(f) 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/IECG/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.
(g) Rules, regulations, bye-laws and directives of LSE as amended from time to time.
The Enquiry Officer submitted her report on 30.06.2003. 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 3 months. The Enquiry Officer held the member guilty of the following violations:
(a) Irregularities in maintenance of Books of Accounts.
(b) Irregularities in issuance of Contract Notes. The Contract Notes did not contain pre-printed serial number. Order time not mentioned on Contract Notes
(c) Transactions with clients on principal to principal basis.
(d) Non-segregation of own funds vis-ï¿½-vis client's funds
(e) Dealing with members of other stock exchanges
(f) Non-maintenance of client database
(g) Off the floor transactions
(h) Delay in payment of money and delivery of securities
(i) Non Payment of full SEBI Registration fee
(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 10.07.2003 was issued to the member to show cause as to why the penalty as recommended by the enquiry officer should not be imposed on it. The member was advised to submit its 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. SEBI did not receive any reply to the show cause notice from the member till date. However, SEBI received a letter dated 12.7.03 from LSE stating that the SCN dated10.07.03 was handed over to the member.;
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