The monetary penalty imposed on noticee for violating the regulations of SEBI and dealing with illiquid trade options – THE SECURITIES AND EXCHANGE BOARD OF INDIA
The noticee was alleged of violating the provisions of regulations 3(a),(b),(c),(d) and regulations 4(1),4(2)(a) of the SEBI Regulations, 2003 for dealing in reversal trades and for the creation of artificial trade option the adjudication proceeding were initiated against the noticee by the appointed adjudication officer RAM RUDRA MURARI in ADJUDICATION ORDER NO.: Order/RM/RV/2021-22/14894
SEBI observed some large-scale trade reversals in the stock options segment of BSE and the investigation was initiated in the matter and the results of the investigation show that a total of 2,91,643 trades comprising 81.38% of all the trades executed in the Stock Options Segment at the BSE and Smt. Manohari Devi Dhandharia (NOTICEE) was found to be involved in conducting these trades and was alleged for violation of SEBI rules and regulation and a show-cause notice was sent to noticee under Rule 4(1) of the Adjudication Rules to show causes to why an inquiry should not be initiated against the Noticee and why penalty should not be imposed on the Noticee under Section 15HA of the SEBI Act for the violation alleged to have been committed by the noticee .
The administrative representative(AR) on behalf of the noticee submitted that Rule 4(1) does not stipulate a limitation period to send a show-cause notice in terms of the said Rule may be issued. And it is a settled principle of law that in various situations where a specific statute does not provide a period of limitation, then the Limitation Act, 1963 shall be applied. The general period of limitation being 3 years, he submitted that the show cause notice is time-barred and liable to be quashed. And the AR relied upon the case of Ashok Shivlal Rupani, Naresh Shivlal Rupani, Uttam Ravji Gada Versus Securities and Exchange Board of India 2019 (8) TMI1474 to show that the issued SCN is not sustainable in the eyes of law.
The adjudication officer in response to this relied on the case of Mr. Rakesh Kathotia & Ors. Versus Securities and Exchange Board of India 2019 (5) TMI 1762 and found the scn to be valid. The proceedings were initiated and the noticee conduct and trading activities were stating that the noticee was involved in dealing with illiquid stock options and the trade log of noticee made it clear that the noticee was involved in dealing with illiquid trade options and has conducted non-genuine trades.
The trading behavior and other findings made it clear that the allegation of violation of regulations 3(a), (b), (c), (d), 4(1), and 4(2)(a) of PFUTP Regulations, 2003 by the Noticee stands established and a monetary penalty of ₹5,00,000/- imposed under section 15-I of the SEBI Act read with rule 5 of the Adjudication Rules.
Order reviewed by Naveen Sharma