Kolar Sharex and Rajkumar Basantani’s Registration as Brokers Cancelled by SEBI for Repeated Violations of Norms
Market regulator Securities and Exchange Board of India (SEBI) has cancelled registrations of Kolar Sharex Pvt Ltd and its director Rajkumar C Basantani for repeatedly violating norms and regulations. Mr Basantani is also trading member of the National Stock Exchange (NSE).
A summary of the SEBI’s action taken report (ATR) showed that actions were initiated against them at least 12 times.
In August 2012, SEBI had suspended Mr Basantani, who was also promoter and chairman of Soundcraft Industries, for one year while brokerage firm Kolar Sharex was suspended for three months. Mr Basantani and Kolar Sharex were registered with NSE and BSE, respectively.
The market regulator observed that Kolar Sharex had a membership of BSE and Inter Connected Stock Exchange (ICSE) before it was expelled from the exchanges in October 2014 after a decision of the disciplinary action committee (DAC) of the BSE, which had considered various irregularities by the broker.
Mr Basantani kept himself away and did not cooperate with SEBI during the proceedings, the market regulator says. SEBI in an email on 25 February 2014 advised BSE and ICSE to examine whether Mr Basantani fulfilled the ‘fit and proper person’ criteria to continue as a member and take suitable action, as deemed fit.
SEBI had also taken various regulatory and enforcement actions against the Mr Basantani in his capacity as a stock broker, as an individual and as a director of various companies. The actions include suspension of certificate of registration as trading member, debarment as an individual, imposition of monetary penalty in the capacity of proprietor and individual, prosecution proceedings for failure to pay the monetary penalty and recovery proceedings for recovering the amount of penalty due to be paid.
SEBI had appointed a designated authority (DA) which found various violations of stock broker regulations by the registered member. The DA noted that Mr Basantani had failed to comply with the fit and proper person criteria and had violated the conditions of grant of registration by failing to pay SEBI registration fees and had not complied with the provisions of code of conduct prescribed for the stock brokers, the market regulator said in two separate orders.
SEBI’s whole time member G Mahalingam while imposing the suspension on the entities observed in the case of Rajkumar C Basantani, “I find that the Noticee grossly fails to meet the criteria for being a fit and proper person and thus is non-compliant with the provisions of Regulation 5(e) of the Stock Brokers Regulations. Further, by not paying the SEBI registration fees and the monetary penalties imposed by the Adjudicating Officer, as mentioned above, the Noticee has violated the provisions of Regulation 9(d) and 9(f) of the Stock Brokers Regulations read with Clauses A(1) and (5) of the Code of Conduct specified for the stockbrokers in Schedule II of the Stock Brokers Regulations.”
In the matter of the Kolar Sharex, the SEBI WTM noted, “while the Noticee, by virtue of having been expelled from the membership of BSE and ICSE, has become non-compliant with one of the basic conditions prescribed for holding a certificate of registration from SEBI as a stockbroker, the various enforcement actions taken against it by SEBI over the years are ample proof of the fact that the continuation of the Noticee as a registered intermediary is detrimental to the interest of the securities market and the investors at large. Considering all these factors in totality, I am in total agreement with the recommendation of the DA that the certificate of registration of the Noticee is cancelled.”
Any certificate of registration granted to a stock broker by SEBI is subject to the condition that he holds the membership of any stock exchange. However, SEBI says the registered member has already been expelled from the exchanges with effect from 20 October 2014. It also failed to obtain prior and post approval from SEBI or BSE for change in control of the management, which amounted to non-compliance with market norms. The regulator thus cancelled the registration certificates of the entities through two separate orders, in accordance with the recommendation of the DA that the certificate of registration be cancelled.