Regulations
SAT sets aside SEBI's Rs11-crore fine against three individuals

According to the SAT, the three had not acted as intermediaries but individual traders in the securities market and hence have not violated any norms of SEBI

 
Mumbai: The Securities Appellate Tribunal (SAT) had set aside an order by Securities and Exchange Board of India (SEBI) that slapped a penalty of Rs11 crore on three individuals for allegedly engaging in fraudulent trading practices in the stock market, reports PTI.
 
The tribunal has set aside the penalty of Rs5 crore each on Dipak Patel and Kanaiyalal Baldevbhai Patel as well as Rs1 crore fine on Anandkumar Baldevbhai Patel. They were allegedly involved in "front running" related to foreign institutional investor, Passport India Investment (Mauritius).
 
Generally, front running refers to a broker executing orders with prior knowledge of the demand from the buyer side.
 
"We are of the considered view that in the facts and circumstances of the present case, the board has erred in holding the appellants guilty of violating regulation 3 of the FUTP (Fraudulent and Unfair Trade Practices) regulations. We, therefore, set aside the impugned orders and allow the appeals with no order as to costs," SAT said in its order.
 
It was alleged that Dipak Patel, a portfolio manager for Passport India, had shared information about forthcoming trading with a Kanaiyalal Baldevbhai Patel. Anandkumar Baldevbhai Patel also allegedly abetted such activities.
 
According to the SAT, the three had not acted as intermediaries but individual traders in the securities market and hence have not violated any norms.
 
As per the SEBI's regulations, front running is prohibited only by intermediaries, and not by traders in the market.
 
"In the absence of any specific provision in the (FUTP) Act, rules or regulations prohibiting front running by a person other than an intermediary, we are of the view that the appellants cannot be held guilty of the charges levelled against them," SAT said.
 
The tribunal said Passport India was the major counter party for trading in the market and had placed huge orders.
 
Hence, the possibility of traders' orders for smaller quantities matching with the orders of Passport India cannot be ruled out, it added.
 
"Therefore, it cannot be said that they have manipulated the market... In the absence of any specific provision in law, it cannot be said that a fraud has been played on the market or market has been manipulated by the appellants when all transactions were screen-based at the prevalent market price," SAT said.
 

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Madras HC stays SEBI order barring Polaris' Arun Jain from market

After a probe into the dealings of Polaris Financial Technology shares during August-September 2000, SEBI held Jain, promoter of the company, guilty of flouting norms related to insider trading

 
Chennai: Madras High Court had stayed an order by Securities and Exchange Board of India (SEBI) which had barred Polaris Financial Technology's chairman and managing director Arun Jain from operating in securities market for a period of two years for alleged insider trading in the company's shares, reports PTI.
 
Justice N Paul Vasanthakumar granted the stay on a petition by Jain seeking to quash the 9th October  order of the Securities and Exchange Board of India.
 
When the matter came up for hearing, SEBI counsel sought time to file counter.
 
The counsel for petitioner then submitted that in such circumstances, the implementation of the order may be stayed.
 
The Judge said that in view of the above, there will be an order of interim stay and adjourned the matter to 20th November.
 
In his petition, Jain submitted that the SEBI's impugned order was clearly "unjustified, perverse and completely devoid of substance".
 
He said the order restrained him from accessing the securities market in relation to events that occurred nearly 12 years ago and had subjected him to undue hardship, damage to his reputation, standing and ability to conduct his business.
 
After a probe into the dealings of the company shares during August-September 2000, SEBI held Jain, promoter of the company, guilty of flouting norms related to insider trading.
 
It had charged him with trading in the stock on the basis of 'unpublished price sensitive information' relating to a proposed acquisition by the firm.
 
SEBI had said Jain dealt in 15,080 shares of the company on behalf of Polaris Holding Private Ltd (PHPL) on the basis of 'unpublished price sensitive information' held by him and had made unfair gains to the tune of Rs27.26 lakh.
 

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COMMENTS

Sohrab Ali

3 years ago

The Securities Appellate Tribunal (SAT), through an Order dated 23rd December 2013, has ruled in Arun's favour and has quashed SEBI’s Order. This means that the restriction applied on Arun no longer continues to apply.

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