Adjudication Order in respect of M/s Seema Securities Pvt. Ltd. in the matter of Inspection of Books...

BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. NR/AO/1 /2015]

UNDER SECTION 15‐I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 3 OF SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995

In respect of

M/s. Seema Securities Pvt. Ltd.(PAN: AACCS7683Q)

In the matter of Inspection of Books of Accounts and Records

BACKGROUND

1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") conducted an

inspection of M/s. Seema Securities Pvt. Ltd. (hereinafter referred to as "Noticee"), broker

of BSE having SEBI registration no. INB011067239 and Depository Participant of CDSL having

SEBI registration no. IN-DP-CDSL-130-2000, to look into the books of accounts and other

records. The inspection was conducted during March 08-12, 2010.

2. During the inspection it was observed that the noticee had failed in observing the applicable

provisions for conducting business as stock broker and depository participant. The following

non-compliances were observed:

Sr. No. Non-Compliance Provision(s) Violated

With regard to stock broking operations

1. Directors of noticee acting as its sub-broker

Regulation 15A of SEBI (Stock Brokers and Sub-brokers) Regulations, 1992 (hereinafter referred to as "Broker Regulations")

2. Not segregating client and own funds and undertaking client transactions from accounts meant for business purposes

Clause A(2) and A(5) of the Code of Conduct for stock brokers laid down under Schedule II read with Regulation 7 of Broker Regulations (hereinafter referred to as "Code of Conduct ofBroker Regulations") and SEBI circular no. SMD/SED/CIR/93/23321 dated November 18, 1993

3. Allotment of terminals to clients Clause A(2) and A(5) of the Code of Conduct for stock brokers laid down under Schedule II read with Regulation 7 of Broker Regulations and SEBI circular no. SMDRP/POLICY/CIR-49/2001 dated

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October 22, 2001 and BSE Notice no 20021217-18 dated December 17, 2002

4. Allotment of terminals at its remisiers' offices

Clause A(2) and A(5) of the Code of Conduct for stock brokers laid down under Schedule II read with Regulation 7 of Broker Regulations and SEBI circular no. SMDRP/POLICY/CIR-49/2001 dated October 22, 2001 and BSE Notice no. 20040205-13 dated February 5, 2004.

5. Operation of terminals by entities other than employees

Clause A(2) and A(5) of the Code of Conduct for stock brokers laid down under Schedule II read with Regulation 7 of Broker Regulations and BSE Notice No. 56712/99 dated July 20, 2000.

6. Not having an exclusive e-mail ID for redressal of investor grievances

Clause A(2) and A(5) of the Code of Conduct for stock brokers laid down under Schedule II read with Regulation 7 of Broker Regulations and SEBI circular MRD/DoP/Dep/SE/Cir-22/06 dated December 18, 2006.

7. Paying interest to clients on credit balances maintained with noticee

Rule 8(1)(f) and 8(3)(f) of Securities Contracts (Regulation) Rules, 1957

With regard to depository participant operations

1. Not ensuring that in-person verification has been carried out at the time of processing of account opening forms.

Clause 4 of Code of Conduct for Participants specified under Regulation 20A of SEBI (Depositories and Participants) Regulations 1996 (hereinafter referred to as "DP Regulations") read with CDSL communiqué no CDSL/A&I/DP/978 dated October 22, 2007 and CDSL Operating Instruction no. 2.4.8 issued under Bye Law 4

2. Not ensuring that all its branches acting as collection centres are connected electronically or through back office with the main DP office.

Regulation 20(2) of DP Regulations read with CDSL communiqué no CDSL/OPS/DP/252 dated March 07, 2003

3. Delaying the dispatch of dematerialization requests to the RTI/STA

Regulation 54(4) of DP Regulations and CDSL Operating Instruction no. 4.4.15 issued under Bye Law 4

4. Not blocking lost requisition slips in the system

Clause 4 of Code of Conduct for Participants specified under Regulation 20A of DP Regulations read with SEBI circular no. SEBI/MRD/Dep/Cir-03/2007 dated February 13, 2007

5. Executing delivery instructions without signature of Beneficial Owner on the requisition slip

Clause 4 of Code of Conduct for Participants specified under Regulation 20A of DP Regulations read with SEBI circular no. SEBI/MRD/Dep/Cir-03/2007 dated February 13, 2007


6. Not refunding credit balances to clients at the time of closure of account

Clause 4 of Code of Conduct for Participants specified under Regulation 20A of DP Regulations read with CDSL Bye Law 13.7 and CDSL operating instruction no. 10.5.2 issued under Bye Law 4.2

3. In view of the above, it was alleged that the violations make the Noticee liable for monetary

penalty under Section 15HB of the Securities and Exchange Board of India Act, 1992

(hereinafter referred to as "SEBI Act"), Sections 19D and 19G of the Depositories Act, 1996

(hereinafter referred to as "Depositories Act") and under Section 23H of Securities

Contracts (Regulation) Act, 1956 (hereinafter referred to as "Securities Contracts Act")

APPOINTMENT OF ADJUDICATING OFFICER

4. The undersigned was appointed as Adjudicating Officer vide order dated March 16, 2011

under Section 15 I of SEBI Act read with Rule 3 of SEBI (Procedure for Holding Inquiry and

Imposing Penalties by Adjudicating Officer) Rules, 1995(hereinafter referred to as "Rules")

to inquire into and adjudge under Section 15HB of the SEBI Act, Sections 19D and 19G of the

Depositories Act and under Section 23H of Securities Contracts Act the violations alleged to

have been committed by the noticee.

SHOW CAUSE NOTICE, REPLY AND PERSONAL HEARING

5. Show Cause Notice (hereinafter referred to as "SCN") no. NRO/ADJ/NR/SSPL/26270/2011

dated August 16, 2011 was issued to the Noticee in terms of the provisions of Rule 4 of SEBI

(Procedure for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 1995

Rule 4 of Depositories (Procedure for Holding Inquiry and Imposing Penalties by

Adjudicating Officer) Rules, 2005 and Rule 4 of Securities Contracts (Regulation) (Procedure

for Holding Inquiry and Imposing Penalties by Adjudicating Officer) Rules, 2005 , calling

upon the Noticee to show cause why an inquiry should not be held against it and why

penalty, if any, should not be imposed for the alleged violation as specified in the SCN.The

noticee vide letter dated September 08, 2011 filed its reply to the SCN and the same has

been dealt with in the later part of this order.In the interest of natural justice an

opportunity of personal hearing was granted to the Noticee on May 22, 2012 at SEBI,

Northern Regional Office, New Delhi.The noticee vide email dated May 18, 2012 submitted

that due to unavoidable circumstances its authorised representative will be unable to

appear for personal hearing on the specified date and sought extension of time for personal

hearing.Another opportunity of personal hearing was granted and the Noticee was advised

to appear for the same on November 27, 2012 at SEBI, Northern Regional Office, New

Delhi.Thenoticee vide email dated November 23, 2012 once again requested for extension

of time for personal hearing.Thus, a last opportunity for hearing was granted to the


noticeeand the Noticee was advised to appear for the same on January 10, 2013 at SEBI,

Northern Regional Office, New Delhi.Mr. Shailendra Kumar Singh, Principal Officer of the

noticee and Mr. Rakesh Gupta, Authorised Representative for the Noticee (Noticee AR)

attended the hearing on January 10, 2013 and made written submissions on behalf of the

noticee that have been dealt with in later part of this order. The noticeealso made

submissions vide letter dated January 18, 2013 which has been dealt with later in this order.

CONSIDERATION OF ISSUES AND FINDINGS

6. I have carefully perused the charges leveled against the Noticee in the SCN, the reply of the

Noticee and the documents available on record. In the instant matter, the following issues

arise for consideration and determination:

a. Whether the Noticee has violated the provisions of the Regulation 15A of Broker

Regulations; Clause A(2) and A(5) of the Code of Conduct of Broker Regulations read with

SEBI circular no. SMD/SED/CIR/93/23321 dated November 18, 1993, SEBI circular no.

SMDRP/POLICY/CIR-49/2001 dated October 22, 2001, BSE Notice no 20021217-18 dated

December 17, 2002, BSE Notice no. 20040205-13 dated February 5, 2004, BSE Notice No.

56712/99 dated July 20, 2000, SEBI circular no. MRD/DoP/Dep/SE/Cir-22/06 dated December

18, 2006; Clause 4 of Code of Conduct for Participants specified under Regulation 20A of DP

Regulations read with CDSL communiqué no CDSL/A&I/DP/978 dated October 22, 2007 and

CDSL Operating Instruction no. 2.4.8 issued under Bye Law 4; Regulation 20(2) of DP

Regulations read with CDSL communiqué no CDSL/OPS/DP/252 dated March 07, 2003, read

with CDSL Bye Law 13.7 and CDSL operating instruction no. 10.5.2 issued under Bye Law 4.2;

SEBI circular no. SEBI/MRD/Dep/Cir-03/2007 dated February 13, 2007; Regulation 54(4) of

DP Regulations and CDSL Operating Instruction no. 4.4.15 issued under Bye Law 4; Rule

8(1)(f) and 8(3)(f) of Securities Contracts (Regulation) Rules, 1957

b. Does the violation on the part of Noticee attract monetary penalty under Section 15HB

of the SEBI Act, Sections 19D and 19G of the Depositories Act and under Section 23H of

Securities Contracts Act

c. If so, what should be the quantum of monetary penalty?

7. Before proceeding further, it will be appropriate to refer to the relevant provisions alleged

to have been violated by the noticee which read as under:

SECURITIES CONTRACTS (REGULATION) RULES, 1957

Qualifications for membership of a recognised stock exchange.


8. The rules relating to admission of members of a stock exchange seeking recognition shall inter

alia provide that :

(1) No person shall be eligible to be elected as a member if—

(a) ………

(b) ………

(c) ……… (d) ………

(e) ………

(f) he is engaged as principal or employee in any business other than that of securities [or

commodity derivatives] except as a broker or agent not involving any personal financial liability

unless he undertakes on admission to sever his connection with such business :

……………….

……………….

(3) No person who is a member at the time of application for recognition or subsequently admitted as

a member shall continue as such if—

(a) ………

(b) ………

(c) ……… (d) ………

(e) ………

(f) he engages either as principal or employee in any business other than that of securities [or

commodity derivatives] except as a broker or agent not involving any personal financial liability,

provided that—……………

Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Regulations, 1992.

CHAPTER II

[Chapter II substituted by SEBI (Stock Brokers and Sub-brokers)(Second Amdt.) Regulations, 2013 w.e.f. 27.9.2013]

REGISTRATION OF STOCK BROKERS

Conditions of registration.

9. Any registration granted by the Board under regulation 6 shall be subject to the following conditions, namely,-

(a) ………

(b) ………

(c) ………

(d) ………

(e) ………

(f) he shall at all times abide by the Code of Conduct as specified in Schedule II; and

(g) ………

[earlierRegulation 7 prior to SEBI (Stock Brokers and Sub-brokers) (Second Amdt.) Regulations, 2013]

SCHEDULE II: CODE OF CONDUCT FOR STOCK BROKERS[Regulation 9]

A. General.


(2) Exercise of due skill and care : A stock-broker shall act with due skill, care and diligence in the

conduct of all his business.

(3)………………

(4)………………

(5) Compliance with statutory requirements: A stock-broker shall abide by all the provisions of the

Act and the rules, regulations issued by the Government, the Board and the Stock Exchange from

time to time as may be applicable to him.

Director not to act as sub-broker.

15A. No director of a stock broker shall act as a sub-broker to the same stock broker

[Inserted by the SEBI (Stock Brokers and Sub-brokers) (Amendment) Regulations, 2003, w.e.f. 23-9-

2003.]

Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996

[Regulation 20A] [Substituted by "20A Grant of certificate of permanent registration" and included as "20AA Participants to abide by code of

conduct" as amended by the SEBI (Depositories and Participants) (Third Amendment) Regulations, 2003, w.e.f. 1-10-2003]

CODE OF CONDUCT FOR PARTICIPANTS 4. A Participant shall be prompt and diligent in opening of a beneficial owner account, dispatch of

the Dematerialisation Request Form, Rematerialisation Request Form and execution of Debit

Instruction Slip and in all the other activities undertaken by him on behalf of the beneficial owners.

Manner of surrender of certificate of security.

54. (4) The participant shall, within seven days of the receipt of certificate of security referred to in

sub-regulation (1) furnish to the issuer details specified in sub-regulation (2) along with the

certificate of security.

SEBI circular no.SMD/SED/CIR/93/23321dated November 18, 1993

Regulation Of Transactions Between Clients And Brokers

1. It shall be compulsory for all Member brokers to keep the money of the clients in a separate

account and their own money in a separate account. No payment for transactions in which the

Member broker is taking a position as a principal will be allowed to be made from the client’s

account. The above principles and the circumstances under which transfer from client’s account to

Member broker’s account would be allowed are enumerated below.

A] Member Broker to keep Accounts: Every member broker shall keep such books of accounts, as

will be necessary, to show and distinguish in connection with his business as a member -

i. Moneys received from or on account of each of his clients and,

ii. the moneys received and the moneys paid on Member’s own account.


B] Obligation to pay money into "clients accounts". Every member broker who holds or receives

money on account of a client shall forthwith pay such money to current or deposit account at bank to

be kept in the name of the member in the title of which the word "clients" shall appear (hereinafter

referred to as "clients account"). Member broker may keep one consolidated clients account for all

the clients or accounts in the name of each client, as he thinks fit: Provided that when a Member

broker receives a cheque or draft representing in part money belonging to the client and in part

money due to the Member, he shall pay the whole of such cheque or draft into the clients account and

effect subsequent transfer as laid down below in para D (ii).

C] What moneys to be paid into "clients account". No money shall be paid into clients account other

than -

i. money held or received on account of clients;

ii. such money belonging to the Member as may be necessary for the purpose of opening or

maintaining the account;

iii. money for replacement of any sum which may by mistake or accident have been drawn from the

account in contravention of para D given below;

iv. acheque or draft received by the Member representing in part money belonging to the client and

in part money due to the Member.

D] What moneys to be withdrawn from "clients account". No money shall be drawn from clients

account other than -

i. money properly required for payment to or on behalf of clients or for or towards payment of a debt

due to the Member from clients or money drawn on client’s authority, or money in respect of which

there is a liability of clients to the Member, provided that money so drawn shall not in any case

exceed the total of the money so held for the time being for such each client;

ii. such money belonging to the Member as may have been paid into the client account under para 1

C [ii] or 1 C [iv] given above;

iii. money which may by mistake or accident have been paid into such account in contravention of

para C above.

SEBI circular no. SMDRP/POLICY/CIR-49/2001dated October 22, 2001

Sub.: Advertisement by brokers/ sub-brokers and grant of trading terminals.

Grant of trading terminals

It has further come to the notice of SEBI that the trading terminals granted to the stockbrokers at

various locations are being mis-utilised for unregistered sub-broking activities. In view of the above,

Exchanges are advised to grant trading terminals only at the members’ registered office, branch

offices and their registered sub-brokers’ offices. Trading terminals granted earlier in places other

than mentioned above should be withdrawn immediately. The Stock Exchanges shall amend their

bye-laws accordingly to take action against the broker who mis-utilises or lets misutilisation of their

trading terminals for unregistered sub-broking activities.


SEBI circular MRD/DoP/Dep/SE/Cir-22/06 dated December 18, 2006.

Sub: Exclusive e-mail ID for redressel of Investor Complaints.

4. Accordingly, all the stock exchanges/registered brokers/registered sub- brokers/listed

companies/depositories/registered depository participants are advised to designate an e-mail ID of

the grievance redressel division/compliance officer exclusively for the purpose of registering

complaints by investors. The above entities are also advised to display the email ID and other

relevant details prominently on their websites and in the various materials/pamphlets/advertisement

campaigns initiated by them for creating investor awareness.

SEBI circular no. SEBI/MRD/Dep/Cir-03/2007 dated February 13, 2007

Safeguards to address the concerns of the investors on transfer of securities in dematerialized

mode

2. Based on the recommendations of the SMAC and in consultation with the depositories, it has been

decided to put in place the following safeguards to address the concerns of the investors on the

captioned subject :

(d) If the DIS booklet is lost / stolen / not traceable by the BO, the same must be intimated to the DP

immediately by the BO in writing. On receipt of such intimation, the DP shall cancel the unused DIS

of the said booklet.

(e) ……………….

(f) ……………….

(g) The DPs shall put in place appropriate checks and balances with regard to verification of

signatures of the BOs while processing the DIS.

BSE Notice No. 56712/99 dated 20 July 2000

Revised application procedure for VSATs.

2. In accordance with the regulations in force, an office shall be considered as a member office only

if it is rented / owned / leased / licensed by a BSE member. Further, the staff operating BOLT

terminal in the member office must be on member`s payroll. In fact the member should have effective

control over the functioning of that office.

BSE Notice no. 20021217-18 dated 17th December, 2002

Reminder SEBI Circular on grant of Trading Terminals

Members of the Exchange are requested to refer to Notice no.104616 dated 12th November, 2001

regarding SEBI Circular no. SMDRP/Policy/Cir-49/2001 dated 22nd October, 2001 on grant of

Trading terminals, which stipulated that the members should install trading terminals only at


members’ registered offices, branch offices and their registered sub-brokers’ offices and they should

not allow the trading terminals to be misutilised for unregistered sub-broking activities. The

members were also advised vide the aforesaid notice that the trading terminals, if any, granted

earlier in places other than the above mentioned places, should be withdrawn immediately and that

they must ensure that such errors do not occur in future.

……………………

Members were also informed vide above referred notice dated 20th July, 2000 that in accordance

with the regulations in force, an office would be considered as a member's office only if it is

rented/owned/leased/licensed by a BSE member. Further, the staff operating BOLT terminal in the

member's office must be on the member's payroll. Similar conditions are also applicable in case of

registered sub-brokers affiliated to the members.

BSE Notice no. 040205-13 dated 5th February 2004

Operate of Bolt terminals by Remisier

Members of the Exchange may kindly note that the Governing Board has authorisedRemisiers to

operate BOLT terminals at members office only. However it is clarified that at present, BOLT

terminals cannot be installed at Remisier’s Office in view of SEBI circular no SMDRP/Policy/Cir-

49/2001 dated October, 22, 2001 which states that BOLT terminals should be installed at Members

Offices’ or their associated Sub-Brokers offices only.

CDSL communiqué no CDSL/OPS/DP/252 March 7, 2003

2. In the above context, SEBI has advised depositories to ensure that all the branches of DPs have

electronic linkage with the main DP centre. All CDSL DPs may, therefore, note that if they are

having any collection branch without electronic linkage with main DP or electronically connected

branch through back office software, it should immediately convert itself into either direct

electronically connected branch, if it is commercially viable proposition to do so or have it linked

with the main DP centre electronically connected through back office software before 01-04-2003

and send their confirmation to us.

CDSL communiqué no CDSL/A&I/DP/978 dated October 22, 2007

“In-Person” Verification of Applicants at The Time of Opening Demat Accounts of Non Body

Corporates

SEBI, vide its letter dated October 17, 2007, has directed depositories to advise their DPs to conduct

„in person‟ verification of the applicants at the time of opening demat accounts. DPs are advised to

take a note of the amended process of verification for strict compliance.

CDSL OPERATING INSTRUCTIONS FOR DEPOSITORY PARTICIPANTS


2.4.8 In-person verification:

2.4.8.1 The authorized official of the DP shall personally verify the photograph(s) affixed in the

account opening form and proof of identity document(s) with the person concerned, before opening

the account of non-body corporate.

4.4.15 DRF along with the security certificates must be forwarded to the Issuer/RTA within 7 days

from the date of receiving physical documents from the BO.

10.5.2 The Account shall be closed by the CDSL system only when all the balances in the account are

Zero.

8. I have carefully perused the written submissions of the Noticee, the copy of the documents

submitted by the Noticee and the materials available on record. The allegations against the

Noticee, reply of the Noticee and my findings thereon are discussed as under:

VIOLATIONS RELATED TO STOCK BROKING OPERATIONS

Directors of noticee acting as its sub-broker

9. During the inspection it was observed that the broker was trading though various sub-

brokers. Upon perusal of the details of the sub-brokers of the noticee it was seen that one

of its sub broker M/s Gee Kay Stock & Shares Ltd. (GKSSL) is also a group company of

noticee. Further it was observed that the directors of GKSSL are the same as that of the

noticee.The noticee in reply to the SCN submitted that they have applied to BSE for

surrender of Sub-broker registration of GKSSL with immediate effect. A copy of the letter for

surrender of Sub-broker registration of GKSSL was also submitted. The noticee further

submitted that there was no investor complaint in this regard for any misuse of the system

or nothing unwarranted done against the investors interest.The noticee at the time of the

personal hearing submitted that appointing common directors between GKSSL and the

noticee was not done intentionally and was a mistake due to lack of knowledge in the year

2000 and misinterpretation of regulations. Further the noticee submitted that sub

brokership application form with all documents and details of directors were submitted to

BSE in the year 2000 and that both BSE as well as SEBI had approved application for sub

brokership of GKSSL. I have perused the submission of the Noticee. The noticee's assertion

that BSE as well as SEBI had mistakenly approved the application of GKSSL despite it having

common directors with the noticee is grossly inappropriate.I note that Regulation 15A of

the Broker Regulations were inserted by the SEBI (Stock Brokers and Sub-brokers)

(Amendment) Regulations, 2003, w.e.f. 23-9-2003. Thus it was only from 23.09.2003

onwards that the provision of no common directorship between broker and sub broker

became applicable. Being a stock broker with regular business operations it is incumbent

upon the noticee to take note of changes in the provisions applicable to its business and

hence, it cannot plead lack of knowledge or misinterpretation of the regulations. Moreover


surrender of Sub-broker registration of GKSSL does not absolve the noticee of the violation

of Regulation 15A of the Broker Regulations which continued for a period of over 6 years

from Sept. 2003 till March 2010 when the inspection was conducted. I thus find that the

Noticee has violated Regulation 15A of the Broker Regulations.

Not segregating client and own funds and undertaking client transactions from accounts

meant for business purposes

10. The inspection report noted that though there were separate bank accounts earmarked by

the noticee for its business operations and client’s transactions, it was observed that proper

funds segregation was not being maintained. Scrutiny of the bank account no.

2426257060189 maintained with Canara Bank, Mumbai (BA2011) which is earmarked for

client accounts, revealed that payments were being made to meet the business expenditure

of the member from the said account. Further, instances of transferring the funds for

Commodity / Currency segment were also observed.The noticee vide letter dated Sept. 08,

2011 in reply to the SCN submitted that "entries, in F.Y. 2008-09 and F.Y. 2009-10 in bank

a/c no. 2426257060189 was our business account to meet the Bombay branch and

exchange expense but our some clients of Mumbai region have deposit their funds wrongly

and branch manager issued cheques to client from the same account. Due to oversight of

our branch manager such transaction had taken place. Now inspection onwards we

immediately stop transfer and receipt of funds from clients in this bank account. We request

you to take a lenient view in this regard." .Thereafter the noticee through its AR at the time

of the personal hearing submitted that, "......We have taken short term loan from our group

company M/s A G Shares and Securities Ltd. (which is not our client) whenever we were

having funds shortfall to meet our exchange obligation. It is pertinent to mention here that

member have to met out funds obligation toward to exchange on settlement day

irrespective of available funds in client bank account. Whenever client payments were not

get cleared on settlement day, we have to fulfill exchange obligation from our own source.

Therefore we have taken short term loan from our group companies to met out exchange

obligation. We have paid short term loan as per availability of funds from time to time to

M/s A G Shares & Securities Ltd. .................we would invite your attention to the Annexure

X(a) and X(b) enclosed in SEBI inspection report where it was mentioned that the transaction

was taken place between our Canara bank account with client (M/s A G Shares and

Securities Ltd.). Transaction related to other clients was neither done nor observed by the

inspection team and not mentioned in the above said Annexure. M/s A G Shares & Securities

Ltd. is not our client. Therefore it is clear that own business account was not used for client

transactions and the client money were segregated properly with our own money."

11. I have perused the submissions of the noticee as well as the relevant portion of the

inspection report. Before dwelling on my findings it is important to refer to financial ledger


referred to in the inspection report. An extract of financial ledger referred to as the client

account at the time of inspection of the noticee is reproduced below:

Client : BA2011 CANARA BANK,MUMBAI A/C NO.2426257060189

Date Bill.No Particulars Debit Credit

12-03-2009 BRV10-1203 GEE KAY STOCK & SHARES LTD 450000.00 0.00

13-03-2009 BPV6-1303 CANARA BANK (A/C NO.100027) 0.00 450000.00


16-03-2009 BRV13-1603 A.G SHARES & SECURITIES LTD 3100000.00 0.00

18-03-2009 BRV12-1803 A.G SHARES & SECURITIES LTD 1100000.00 0.00


23-03-2009 BPV7-2303 A.G SHARES & SECURITIES LTD 0.00 400000.00

23-03-2009 BRV13-2303 CANARA BANK (A/C NO.100027) 400000.00 0.00




26-03-2009 BPV4-2603 G K STOCK & SHARES LTD 0.00 600000.00


12. The noticee had initially submitted that the account was actually its business account into

which some of the clients mistakenly deposited funds and payments were also made to

clients from this account by mistake. In this regard I observe that SEBI circular no.

SMD/SED/CIR/93/23321 dated November 18, 1993 at Para 1D(iii) allows for a situation

where money gets deposited by mistake into the clients' account in contravention of the

provisions of the circular. However, on perusal of the ledger attached with the inspection

report I observe that the payments were made for a period of 2 years. The noticee's

assertion that it was by mistake that the business account was informed to be the clients'

account and that payments to clients were made erroneously from this account appears to

be an after-thought pursuant to the violation brought out in the inspection report. It

appears that these payments were a routine practice and therefore I am not inclined to

accept the explanation provided by the noticee.

13. Thereafter at the time of the personal hearing the AR of the noticee without making any

assertion whether the bank account was client account or business account stated that

transactions were made only with group companies. These transactions were in the nature

of short term loans that were taken from its group concerns required for meeting exchange

obligations of the clients. Firstly, this submission is in complete contradiction of the

noticee's earlier submission made vide letter dated Sept. 08, 2011 in reply to the SCN.

Secondly, even if noticee's stand regarding short term loans taken from group companies

were construed to be correct still such transactions with group companies of the noticee in

the clients' account are in contravention of the provisions of SEBI circular no.

SMD/SED/CIR/93/23321 dated November 18, 1993.


14. I thus find that the noticee has failed to maintain segregation between own funds & client

funds and has violated the provisions of Clause A(2) of Code of Conduct for brokers laid

down under Schedule II specified under Regulation 7 of Broker Regulations read with SEBI

Circular no SMD/SED/CIR/93/23321 dated November 18, 1993.

Allotment of terminals to clients

15. At the time of inspection it was observed that the noticee had allotted / granted terminals

at its clients' addresses. In the inspection report it has been brought out that these locations

were shown as the branch offices of the noticee. For verification, the lease / rent

agreements for these premises were sought on a sample basis from the noticee during the

inspection. An examination of the same revealed various inconsistencies in the agreements

thereby suggesting that the noticee had installed its terminals at the premises of its clients

mentioning the same as its branches.

16. The noticee has stated that, "allegation of non-compliance was based merely on the ground

of common address of client and our terminal location. Our all trading terminals are

installed either in our own office (main office and branches) where only our staff were

authorized to operate trading terminals or in our registered sub broker office. We would also

like to highlight that SEBI/Exchange has never prohibited to get the premises on rent / lease

from their clients or relative of clients………..it is clear that SEBI/Exchange has not imposed

any restriction to get the premises on rent from relative of clients. And we have got the

premises from the relative/landlord of clients on rent to run our branches by executing rent

agreement with landlord. We have paid them rent in due course as per our mutual terms

and conditions." The noticee vide letter dated August 25, 2010 submitted to SEBI that,

"During the F.Y. 2009-10 we have paid rent to 7 licensors of various branches, in this regard

we had already submitted copy of respective ledgers indicating the payment of rent to these

entities during 2009-10. Our company is having the policy to pay the rent to the licensors at

the end of the financial year and all the licensors agreed on it. We are enclosing copy of rent

payable account, through which rent paid to licensors. Some of the licensors has authorised

us to adjust the rent amount through their security margin account for trading purpose. The

noticee has also submitted, at the time of the personal hearing, details of the landlord from

whom the office premises has been taken on rent.

17. I have perused the inspection report as well as the response of the noticee with regard to

the alleged violation that they have granted terminals to its clients. In this regard I note

from the BSE Notice no. 20021217-18 dated 17th December, 2002 that "an office would be

considered as a member's office only if it is rented/owned/leased/licensed by a BSE

member." The noticee has contended that SEBI or BSE does not expressly prohibit leasing of

premises from either clients/their relatives. However, on perusal of the inspection report I


observe that the issue is in line with the inconsistencies observed in the lease agreements. I

have perused the copies of the lease agreements submitted before me by the noticee. As

observed in the inspection report I also note that some of the lease agreements have not

been entered on a stamp paper and the details such as name of owner / consideration /

period of agreement are incomplete.

18. Further, as regards the actual payment of rent the noticee has submitted that it was

mutually decided between noticee and lessors that rent payable would be adjusted in the

trading account of the client.

19. However, barring the inconsistencies there is no material before me to reasonably prove

that the noticee had provided terminals to its clients.

20. I thus find that alleged violation by the noticee of Clause A(2) and A(5) of the Code of

Conduct for stock brokers laid down under Schedule II read with Regulation 7 of Broker

Regulationsread with SEBI circular no. SMDRP/POLICY/CIR-49/2001 dated October 22, 2001

and BSE Notice no. 20040205-13 dated February 5, 2004 cannot be held in this instance.

Allotment of terminals at its remisiers' offices

21. The inspection report found that trading terminals had been allotted to its remisiers. In this

regard the inspection report made the following observations:

i. one of the terminals had been allotted by the broker at the office of its remisier,

namely, ShriDevendra K Varshney, at Shop No.-35, Sai Complex, 3 Cement Road,

Dehradun-248001. (CTCL ID – 2820020035001000)

ii. Further, from the ledgers of the remisiersShriAshish Jain and ShriKanhaiyaRastogi it

was observed that VSAT expenses were being debited to the said accounts indicating

that terminal had been allotted to the said remisier.

iii. The broker had in the pre-inspection information submitted the addresses of the

above remisiers as its own branch offices. However, a perusal of the ‘leave and

license agreement’ entered into by the member for the said premises indicated that

the same were not proper / complete and had not been entered on a stamp paper.

Hence these could not be treated as authentic.

22. The noticee's AR at the time of the personal hearing submitted, "We would like to clarify

that we have not allotted terminals to remisiers but we have taken their premises on rent to

run our branch office and also authorised them to operate from our office as per exchange

norms. The remisiers are not prohibited to operate from member main or branch office or

there were not any restriction to get premises of remisiers on rent. Therefore merely on the

ground of the common address of the remisiers and our branch office, it is not correct to


alleged that we have allotted terminal to remisiers. Further we would also like to submit

that we have appointed our own dealer to operate trading terminal installed at our branch

office premises taken on rent from our remisier."

23. I have perused the findings of the inspection as well as the reply furnished by the noticee.

The noticee has submitted before me that the terminals located at the remisiers' officers

are operated by the employees of the noticee hence they cannot be alleged to have allotted

terminals to its remisiers. However, this information has not been provided at any stage

before the personal hearing i.e. at the time of submission of the pre-inspection

questionnaire or at the time of the inspection, at the time of filing response to the

communication of findings of the inspection or in reply to the SCN. Here I would also like to

note that even though presently the noticee's employees may be operating the terminals

located at the remisiers' premises but clearly this was not the case at the time of the

inspection otherwise the noticee would have clarified its stand in the various submissions

made by it. Thus I can safely conclude that the submissions of the noticee at the time of the

personal hearing by its AR are merely after thoughts to justify the violations committed by

the noticee.

24. Therefore I find that the noticee has violated Clause A(2) and A(5) of the Code of Conduct

for stock brokers laid down under Schedule II read with Regulation 7 of Broker Regulations

read with SEBI circular no. SMDRP/POLICY/CIR-49/2001 dated October 22, 2001 and BSE

Notice no. 20040205-13 dated February 5, 2004 by granting terminals to its remisiers.

Operation of terminals by persons other than employees

25. During the inspection it was observed that certain users of the terminals of the noticee

were not it's employees / on its payrolls. The noticee has submitted the users of the

terminals that are alleged to not be on the noticee's payrolls are employees of its sister

concern A.G. Shares and Securities Ltd., NSE member. The company has further stated that,

"Due to closely held group companies and same nature of activity we are allotting the

terminals of BSE and NSE simultaneously to all of our branches and sub-brokers. In such a

small level of operations separate demarcation of employees for operating the terminal is

not economically feasible." The noticee has also requested to consider that it is not

economically feasible to have separate employees for NSE and BSE.

26. On perusal of the noticee's reply I observe that while it is understandable that due to cost

economies the noticee may have felt it feasible to have common employees with its sister

concern. However, by doing so it is in violation of BSE notice no. 56712/99 dated July 20,

2000 which states that "the staff operating BOLT terminal in the member's office must be on

the member's payroll." Thus byallowing persons that are not its employees/ on its payroll to


operate its terminals the noticee has violated Clause A(2) and A(5) of the Code of Conduct

for stock brokers laid down under Schedule II read with Regulation 7 of Broker

Regulationsread with BSE Notice No. 56712/99 dated July 20, 2000.

Not having an exclusive e-mail ID for redressal of investor grievances

27. It was observed at the time of inspection from the client registration forms / contract

notes/ website that the noticee had not created a separate e-mail ID for lodging of investor

complaints. The noticee has submitted that they have a designated an email id

[email protected] the purpose of registering complaint by investors and that the

same has been displayed on its website. At the time of the personal hearing it was

submitted that that at the time of inspection the noticee had old KYC kit which did not

include the email id. It was further submitted that the new KYC kits included the email id.

28. The noticee has not contested the observation in the inspection and by its own admission it

had not displayed the email id designated for redressal of investor grievances on client

registration forms / contract notes/ website. There appears no apparent reason why the

contract notes could not carry the email id even after almost 4 years of the issue of the

circular.Thus by not displaying exclusive e-mail ID for redressal of investor grievances on its

client registration forms / contract notes/ website the noticee has violated Clause A(2) and

A(5) of the Code of Conduct for stock brokers laid down under Schedule II read with

Regulation 7 of Broker Regulationsread with SEBI circular MRD/DoP/Dep/SE/Cir-22/06 dated

December 18, 2006.

Paying interest to clients on credit balances maintained with noticee

29. The inspection report noted that the noticee was charging an interest @2% per month from

its clients who had failed to meet the pay-in / margin obligation due to the Member on the

due date. The same was also included under the “Operative Clauses” as part of the Member

Client Agreement entered into between SSPL with his clients. The inspection report further

observes that examination of the client ledgers of the noticee indicated that certain interest

was also being paid to its clients. On enquiry it was informed that w.e.f. 2009-10, noticee

was paying to its clients an amount of interest @15% p.a. (approx.) on the additional funds

kept by the clients with the broker. However, there was no written authorization in this

regard available. At the time of the personal hearing authorised representative of the

noticee submitted that the noticee was "charging interest on the amount of delayed

payment received from clients as per policy and procedures. Later in 2009, client has

requested us to consider the available free credit amount lying in their account under

running account authorisation. We have taken the client request in positive spirit under our

investor friendly motto and decided to consider the available free credit balances of client


while debiting the delay payment charges. In this regard we have two option to give the

benefit on credit amount of the clients a)to adjust the interest on credit amount with the

interest on debit amount b) to give the separate credit entry of interest on credit amount.

We believe in transparency and decided to give the interest on credit amount of the client

separately. You may also appreciate that our policy & procedures in respect of interest

charged on delayed payment or interest given to clients on their credit balance was

endorsed by SEBI vide point no 8(d) of Annexure A of SEBI circular MIRSD/ SE /Cir-19/2009

dated December 3, 2009 which says " There shall be a mandatory document dealing with

policies and procedures for each of the following under appropriate headings:

d. imposition of penalty/delayed payment charges by either party, specifying the rate and

the period (This must not result in funding by the broker in contravention of the applicable

laws) ". The interest charged/paid on debit/credit balances to clients was incidental &

ancillary of our security market business policy and our policies and procedures were based

on the basic guidelines of SEBI. Further we would also like to submit that we have stopped

paying the interest on credit balances to the clients as per our modified policy and

procedures."

30. I have considered the inspection findings and the submissions of the noticee. The noticee

has not contested that certain interest was being paid to clients that had a credit balance in

their accounts. However, I note that the inspection observation was highlighting that while

penalty charged from clients for debit balance has been specified in the “Operative Clauses”

as part of the Member Client Agreement, the interest paid to the clients has not been

specified anywhere. The SEBI circular MIRSD/ SE /Cir-19/2009 dated December 3, 2009

quoted by the noticee in its defence itself states that "There shall be a mandatory document

dealing with policies and procedures….". Thus the issue is not with interest being paid to

clients but the absence of a standard policy for an important pecuniary function of the

noticee. Thus by paying interest to clients on credit balances maintained with noticee it has

violated Rule 8(1)(f) and 8(3)(f) of Securities Contracts (Regulation) Rules, 1957.

VIOLATIONS RELATED TO DEPOSITORY PARTICIPANT OPERATIONS

Not ensuring that in-person verification has been carried out at the time of processing of

account opening forms

31. At the time of the inspection certain instances of demat account opening were observed

where in-person verification had not been carried out by the noticee's own staff. The

noticee at the time of the personal hearing has submitted that as they are depository


participant of CDSL and NSDL under different companies of their group hence they have

certain staff that is common to both its group companies. They have further submitted that

in the instances brought out in the inspection report the in-person verification prior to

opening of demat account was carried out by the staff of their group company and that

such practice has been adopted as a cost cutting policy due to the market downturn. The

noticee has not contested the allegation that the person carrying out in person verification

prior to demat account opening were not its own employees. It has instead submitted that

the verification was done by staff of its group company. I note that CDSL Operating

Instruction 2.4.8 states that, "The authorized official of the DP shall personally verify the

photograph(s) affixed in the account opening form and proof of identity document(s) with

the person concerned, before opening the account of non-body corporate." Hence in view

of the CDSL operating instructions I am of the view that by utilizing staff of its group

companies for in person verification prior to opening demat account the noticee has not

violated the CDSL operating instruction 2.4.8. Thus as alleged in the inspection report by not

using own staff for in-person verification (instead using staff of group company) and

consequent violation of Clause 4 of Code of Conduct for Participants specified under

Regulation 20A of DP Regulations read with CDSL communiqué no CDSL/A&I/DP/ 978 dated

October 22, 2007 and CDSL operating Instruction no. 2.4.8 issued under Bye Law 4 cannot

be held in this instance.

Not ensuring that all its branches acting as collection centres are connected electronically

or through back office with the main DP office

32. It was observed during the inspection that the DP was receiving account opening forms,

demat requests, instructions and other requests from the branches of its trading operations

and these branches were working as collection centre for the DP operations. Account

opening forms, demat requests, instruction slips and other requests submitted by the

clients at the collection centers are forwarded to the main DP office for further processing.

However, it was observed that collection centers of the DP were connected neither through

direct electronic connection nor as back office with the main DP office. The noticee in its

reply to the inspection report, reply to the SCN and at the time of personal hearing has

submitted that its DP collection centre are connected through back office with the main DP

centre.

33. I have perused the inspection report as well as the noticee's submission with regard to the

connectivity of collection centers of DP with its main office. The DP has not submitted any

proof in respect of its contention that all its collection centres were connected through back

office with its main DP office. However, since the inspection report does not mention the

list of branches acting as collection centers nor has any proof of receipt of documents by


the DP from these locations been provided therein. Therefore there is no documentary

evidence to prove the violations alleged in the inspection report. Thus I find that the

allegation that branches acting as collection centres were not connected electronically and

alleged violation of Regulation 20(2) of DP Regulations read with CDSL communiqué no

CDSL/OPS/DP/252 dated March 07, 2003 cannot be held in this instance.

Delaying the dispatch of dematerialization requests to the RTI/STA

At the time of inspection the noticee's procedure of processing and dispatching the demat

requests to RTI/STA had been examined to ascertain whether the DP was sending the

requests to the concerned Issuer/RTA within stipulated time. However, a large number of

instances were found wherein DP failed to dispatch demat requests to the concerned

RTI/STA within the stipulated limit of 07 days. The noticee has submitted a detailed list

explaining the instances of delay brought out in the inspection report. I observe from the

noticee's response that in no case the number of days exceeded 07 working days. The CDSL

Operating Instruction no. 4.4.15 stipulates that, "security certificates must be forwarded to

the Issuer/RTA within 7 days from the date of receiving physical documents". I'm inclined to

give the benefit of doubt to the noticee in the interest of natural justice. Thus the alleged

violation cannot be held in this instance.

Not blocking lost requisition slips in the system

34. At the time of inspection the noticee's procedure of issuance of Delivery Instruction Slip

Booklet ("DIS booklet") was scrutinized and it was found that certain safeguards while

issuance of the same as stipulated by SEBI/CDSL were not being adhered to. For instance

while new Delivery Instruction Slip (DIS) was issued on the basis of letter mentioning loss of

requisition slip, however, lost instruction slips had not been blocked in the system.The

noticee has submitted that it was due to oversight of its staff that the DIS reported to be

lost were not blocked in the system. It has also submitted that these DIS have been

subsequently blocked in the system.

35. The noticee has not contested the violation brought out in the inspection report. On perusal

of the inspection report I observe that 4 such instances have been cited therein. While it is

not a very large number of instances of nonetheless the noticee has violated the

stipulations pertaining to lost DIS.I thus find that by not blocking lost DIS in the system the

noticee has violated Clause 4 of Code of Conduct for Participants specified under Regulation

20A of DP Regulationsread with SEBI circular no. SEBI/MRD/Dep/Cir-03/2007 dated

February 13, 2007.


Executing delivery instructions without signature of beneficial owner on the requisition

slip

During the inspection it was observed that instructions had been executed without the

signature of the beneficial owner on the instruction slip. The inspection report had noted

that instructions had been executed without the signature of one beneficial owner

HamzaIqwal on the instruction slip. The DP had later obtained confirmation from the client

in respect of the instructions executed by him, however the execution was done on the

basis of an unsigned DIS. Thus the Noticee has violated Clause 4 of Code of Conduct for

Participants specified under Regulation 20A of DP Regulations read with SEBI circular no.

SEBI/MRD/Dep/Cir-03/2007 dated February 13, 2007

Not refunding credit balances to clients at the time of closure of account

36. The inspection report noted a large number of instances wherein beneficial owner account

was closed inspite of balance amount lying as credit in the closed beneficial owner account.

The noticee has submitted in reply to the SCN that the accounts mentioned in the

inspection report were closed before billing. Hence there was a credit balance lying in the

account after closure. At the time of the personal hearing it was submitted that the noticee

as practice refunds balance credit amount to client after next billing date due to adjustment

reason. They further submitted that most of the clients have given them authority to adjust

the credit balance of one account with the debit balance of another family account. The

provision alleged to have been violated by the noticee states that the account shall be

closed in the system when all the balances in the account are zero. I find that the CDSL

operating instruction is quite self explanatory hence the reply of the noticee in this regard is

unsatisfactory and not acceptable. Thus by failing to clear balances in the DP account of

client before closure the noticee has violated Clause 4 of Code of Conduct for Participants

specified under Regulation 20A of DP Regulations read with CDSL Bye Law 13.7 and CDSL

operating instruction no. 10.5.2 issued under Bye Law 4.2

37. In light of the above, following violations stands established:

a) noticee has violated Regulation 15A of the Broker Regulations as its Directors were

acting as its sub-broker

b) noticee has failed to maintain segregation between own funds & client funds and has

violated the provisions of Clause A(2) of Code of Conduct for Brokers laid down under

Schedule II specified under Regulation 7 of Broker Regulations read with SEBI Circular no

SMD/SED/CIR/93/23321 dated November 18, 1993.


c) by granting terminals to its remisiersnoticee has violated Clause A(2) and A(5) of the

Code of Conduct for stock brokers laid down under Schedule II read with Regulation 7 of

Broker Regulations read with SEBI circular no. SMDRP/POLICY/CIR-49/2001 dated

October 22, 2001 and BSE Notice no. 20040205-13 dated February 5, 2004

d) by allowing persons that are not its employees/ on its payroll to operate its terminals

the noticee has violated Clause A(2) and A(5) of the Code of Conduct for stock brokers

laid down under Schedule II read with Regulation 7 of Broker Regulations read with BSE

Notice No. 56712/99 dated July 20, 2000.

e) by not displaying exclusive e-mail ID for redressal of investor grievances on its client

registration forms / contract notes/ website the noticee has violated Clause A(2) and

A(5) of the Code of Conduct for stock brokers laid down under Schedule II read with

Regulation 7 of Broker Regulations read with SEBI circular MRD/DoP/Dep/SE/Cir-22/06

dated December 18, 2006

f) by paying interest to clients on credit balances maintained with noticee it has violated

Rule 8(1)(f) and 8(3)(f) of Securities Contracts (Regulation) Rules, 1957

g) by not blocking lost DIS in the system the noticee has violated Clause 4 of Code of

Conduct for Participants specified under Regulation 20A of DP Regulations read with

SEBI circular no. SEBI/MRD/Dep/Cir-03/2007 dated February 13, 2007

h) by executing instructions based on unsigned DIS, the Noticee has violated Clause 4 of

Code of Conduct for Participants specified under Regulation 20A of DP Regulations read

with SEBI circular no. SEBI/MRD/Dep/Cir-03/2007 dated February 13, 2007

i) by failing to clear balances in the DP account of client before closure the noticee has

violated Clause 4 of Code of Conduct for Participants specified under Regulation 20A of

DP Regulations read with CDSL Bye Law 13.7 and CDSL operating instruction no. 10.5.2

issued under Bye Law 4.2

38. The Hon’ble Supreme Court of India in the matter of SEBI Vs. Shri Ram Mutual Fund *2006+

68 SCL 216(SC) held that “In our considered opinion, penalty is attracted as soon as the

contravention of the statutory obligation as contemplated by the Act and the Regulations is

established and hence the intention of the parties committing such violation becomes

wholly irrelevant…”. Hence, I am constrained to take a view in line of the Hon'ble Supreme

Court ruling.

39. In view of the foregoing, I am convinced that it is a fit case to impose monetary penalty

under following provisions:

a) Section 15 HB of the SEBI Act which reads as follows:


15HB.Penalty for contravention where no separate penalty has been provided.-

Whoever fails to comply with any provision of this Act, the rules or the regulations made

or directions issued by the Board thereunder for which no separate penalty has been

provided, shall be liable to a penalty which may extend to one crore rupees.

b) Section 19G of Depositories Act, 1996 which reads as follows:

19G. Penalty for contravention where no separate penalty has been provided.

Whoever fails to comply with any provision of this Act, the rules or the regulations or

bye-laws made or directions issued by the Board thereunder for which no separate

penalty has been provided, shall be liable to a penalty which shall not be less than one

lakh rupees but which may extend to one crore rupees.

c) Section 23H of Securities Contracts (Regulation) Act, 1956which reads as follows:

23H. Penalty for contravention where no separate penalty has been provided.

Whoever fails to comply with any provision of this Act, the rules or articles or bye- laws

or the regulations of the recognised stock exchange or directions issued by the Securities

and Exchange Board of India for which no separate penalty has been provided, shall be

liable to a penalty which shall not be less than one lakh rupees but which may extend to

one crore rupees.

40. While determining the quantum of monetary penalty under Section 15 HB of the SEBI Act,

Section 19G of Depositories Act, 1996 and Section 23H of Securities Contracts (Regulation)

Act, 1956 , I have considered the factors stipulated in Section 15J of SEBI Act,Section 19I of

Depositories Act, 1996 and Section 23J of Securities Contracts (Regulation) Act, 1956

respectively which reads as under:-

15J - Factors to be taken into account by the adjudicating officer

While adjudging quantum of penalty under Section 15-I, the adjudicating officer shall have

due regard to the following factors, namely:-

(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as

a result of the default;

(b) the amount of loss caused to an investor or group of investors as a result of the default;

(c) the repetitive nature of the default.

19-I. Factors to be taken into account by adjudicating officer

(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made

as a result of the default;


(c) the repetitive nature of the default.

23J Factors to be taken into account by adjudicating officer..


(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as

a result of the default;


(c) the repetitive nature of the default

41. In the instant case, it is noted that no quantifiable figures are available to assess the

disproportionate gain or unfair advantage made as a result of such default by the Noticee.

Further from the material available on record, it may not be possible to ascertain the exact

monetary loss to the investors on account of default by the Noticee. I find from the records

before me that the default of the Noticee is not repetitive in nature.

ORDER

42. After taking into consideration all the facts and circumstances of the case, I impose a

penalty of Rs2,00,000/- (Rupees Two Lakhs only) under section 15 HB of the SEBI Act, Rs

1,00,000/- (Rupees one Lakh only) under Section 19G of Depositories Act, 1996 and Rs

2,00,000/- (Rupees Two Lakhs only) underSection 23H of Securities Contracts (Regulation)

Act, 1956 on the Noticee. Therefore a total penalty of Rs 5,00,000/- (Rupees Five Lakhs

only) is imposed upon the noticee. I am of the view that the said penalty would be

commensurate with the violations committed by the noticee.

43. The Noticee shall pay the said amount of penalty by way of demand draft in favour of “SEBI

- Penalties Remittable to Government of India”, payable at Mumbai, within 45 days of

receipt of this order. The said demand draft should be forwarded to Regional Director, SEBI

- NRO, 5th Floor, Bank of Baroda Building, 16 SansadMarg, NewDelhi - 110001.

44. In terms of rule 6 of the Rules, copies of this order are sent to the Noticee and also to the

Securities and Exchange Board of India.

Date:May 1, 2015 NARENDRA RAWAT Place: New Delhi ADJUDICATING OFFICER


Adjudication Order in respect of M/s Seema Securities Pvt. Ltd. in the matter of Inspection of Books...

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