Allegations against noticee for unfair trade practices disposed of due to absence of trade log – THE SECURITY AND EXCHANGE BOARD OF INDIA
The SEBI conducted an investigation into the trading of K. Sera Sera Production Ltd. And observed violation of SEBI regulations, 2003 by certain employees and one such employee was Mr. Sunil Kumar Purohit (Noticee) and adjudication proceedings were initiated against the noticee for alleged violations of Regulations 4(1), 4(2)(a), 4(2)(b) and 4(2)(g) of PFUTP Regulations and an adjudication officer was appointed SOMA MAJUMDER in [ADJUDICATION ORDER NO. Order/SM/DD/2021-22/15035]
A show-cause notice was sent to noticee under Rule 4 of the SEBI Rules, 1995 to show cause as to why an inquiry should not be held and the penalty is not imposed under Section 15HA of the SEBI Act for the alleged violations. The notice was served and the noticee authoritative representative responded to the alleged violations the adjudication proceedings were initiated and it was found out that Noticee purchased 13,04,870 shares and sold 13,04,605 shares constituting around 7.25% and 6.90% of total volume traded during the period under investigation respectively and the pattern of circular trading indicates that it was usually among a group of brokers and same numbers of shares were rotated circularly among brokers in the group daily so that the same number of shares go back to the original seller The Investigation reports alleges that this manipulative trading operation was planned very carefully to avoid any easy detection.
The SCN alleged that few members and their clients including Noticee, accounted for a large percentage of the total traded volumes in the scrip and majority of the trades were synchronized in nature and the noticee traded very carefully and instead of regular trading the noticee chose a particular time and it helped noticee in creating an artificial environment in the market. The noticee in one of the replies contended that the noticee has not been provided with the original trade log and order log which contained all the details of alleged trades done by noticee in the scrip of K. Sera Sera.
The officer also considers that the trade log is not available on record and some efforts were made to obtain the trade log but it was informed that the data was not available in the system the officer also noted that the details cannot be obtained and since the details cannot be obtained the officer notes that Noticee has been alleged to have created artificial volume through circular and synchronized trades, from the material available on record and no connection can be established with the material available on record.
Noticee in his further submissions stated that t in absence of the trade log and order log. The noticee was not able to file legal submission on the merits of the case and the officer also believes that in the absence of the documents it is impossible to comment on the accuracy of the data which forms the basis of the charge of synchronized and circular trades amounting to violations of PFTUP Regulations by Noticee.
Therefore in the absence of relevant trade log and order log and considering the error in the data provided in the SCN and also placing reliance on aforesaid judgment. The officer decides that the allegation against Noticee that he has violated Regulations 4(1), 4(2) (a), (b), and (g) of PFUTP Regulations cannot be established and the adjudication proceedings against the noticee are disposed of.
Order reviewed by Naveen Sharma