order in respect of tradings by mr. prashant kamble

8/10/2019 Order in respect of tradings by Mr. Prashant Kamble

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Order in respect of tradings by Mr. Prashant Kamble Page 1 of 7

WTM/RKA/IVD/133/2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

UNDER SECTION 11B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992.

IN RESPECT OF MR. PRASHANT KAMBLE (PAN: AYYPK6664J)

Appearance for the noticee:

Mr. Joby Mathew, Advocate

1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') conductedinvestigation with respect to the trading activities of Mr. Prashant Kamble (hereinafter referredto as noticee') at National Stock Exchange of India Ltd. ( hereinafter referred to as NSE) andBombay Stock Exchange Ltd. (hereinafter referred to as 'BSE') for the period of August 16,2008 to September 2009 (hereinafter referred to as 1st period) , and October, 2009 to June,2010 (hereinafter referred to as 2 nd period) (collectively referred to as the 'Investigation Period').

2. The investigation inter alia revealed that:

(a) The noticee had invested in a total of 89 scrips during the Investigation Period and thegross buy and sell value of the same were approximately ` 28.48 crores and ` 28.74 crores,respectively.

(b) Of these 89 scrips, the noticee had allegedly indulged in self-trades in 21 scrips accountingfor 75,725 shares on 189 instances during the Investigation Period details of which aredescribed in the following table:

Table 1: Details of self-trade by the noticee

Sl. No. Scrip name Total Buy Total Sale Self trade qty No. of Selftrades

1 Crystal Software Solutions Ltd. 1,53,837 1,53,007 15,190 3

2 Sanguine Media Ltd. 15,15,476 15,15,421 10,769 31

3 Jumbo Bag Ltd. 2,90,571 2,45,936 8,215 13

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4 Gandhinagar Hotels Ltd. 2,56,336 2,43,764 15,473 31

5 G.S. Auto International Ltd. 15,77,830 15,77,630 12,403 29

6 SKS Logistics Ltd. 8,48,154 8,31,923 8,741 31

7 Gokul Refoils and Solvent Limited 23,705 23,705 650 1

8 Softech Infinium Solutions Limited 1,74,700 2,73,700 1,200 6

9 Kanani Industries Ltd. 96,823 96,681 1,016 7

10 Arihant Capital Markets Ltd. 13,566 13,566 911 3

11 Marg Ltd. 16,279 16,279 289 1

12 Gujarat Metallic Coal & Coke Ltd. 10,33,051 10,33,051 459 19

13 Syncom Formulations (I) Ltd. 45,196 45,196 187 1

14 Interworld Digital Ltd. 14,31,549 14,31,464 95 3

15 Panchsheel Organic Ltd. 42,587 42,587 80 2

16 Indiaco Ventures Ltd. 443 443 11 3

17 Meuse Kara & Sungrace Mafatlal Ltd. 98,003 55,943 10 1

18 Swasti Vinayaka Synthetics Ltd. 8,21,460 8,21,379 10 1

19 Shalibhadra Finance Ltd. 78,083 78,083 10 1

20 Beckons Industries Ltd. 86,103 86,103 5 1

21 Sacheta Metals Ltd. 75,001 67,951 1 1

TOTAL 75,725 189

(c) Out of these 189 instances of alleged self-trades by the noticee, on 111 instances (i.e., 59%of the total alleged instances of self-trades by the noticee) accounting for 53,185 shares (i.e.,70% of total number of shares self-traded by the noticee), the time difference betweenplacing the buy orders and the sell orders was less than 10 minutes. The time-wise details ofthese alleged self-trades is described in the following table:

Table 2: Self Trades and Time Difference

Time Difference No. of Trades

Less than 1 Minute 55Between 1 -2 Minutes 13

Between 2 - 5 Minutes 25Between 5 - 10 Minutes 18

Total 111



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3. Based on these facts, a Show Cause Notice (hereinafter referred to as SCN) dated January 10,2014 was issued to the noticee alleging inter alia that the noticee allegedly executed 189 such self-trades in 21 scrips accounting for 75,725 shares to provide a false and misleading appearance oftrading in the said scrip and thereby contravened the provisions of regulations 3(a),(b),(c),(d),

4(1), 4(2) (a) and (g) of the Securities and Exchange Board of India (Prohibition of Fraudulentand Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (the PFUTPRegulations) by the noticee. The provisions of the regulations alleged to be contravened by thenoticee are reproduced hereunder:

"3. Prohibition of certain dealings in securities No person shall directly or indirectly

(a) buy, sell or otherwise deal in securities in a fraudulent manner;(b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to be li

recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the prov Act or the rules or the regulations made there under;(c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of securities which

proposed to be listed on a recognized stock exchange;(d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon anconnection with any dealing in or issue of securities which are listed or proposed to be listed on a recognexchange in contravention of the provisions of the Act or the rules and the regulations made there under.

4. Prohibition of manipulative, fraudulent and unfair trade practices

(1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfai practice in securities.

(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud ainclude all or any of the following, namely:-

(a) indulging in an act which creates false or misleading appearance of trading in the securities market;......................................................................................................(g) entering into a transaction in securities without intention of performing it or without intention of cownership of such security;

..................................................

4. Vide its letter dated April 4, 2014, the noticee submitted its reply to the SCN. The noticee wasalso granted an opportunity of personal hearing on May 15, 2014 when Mr. Joby Mathew,

Advocate appeared as the Authorized Representative (hereinafter referred to as "AR") of thenoticee and made submissions. The replies and submissions of the noticee are inter alia as under:

(a) SEBI did not provide the complete investigation report to the noticee.



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(b) SEBI did not provide copies of BSE and NSE reports in this regard.(c) SEBI has provided the noticee only the extracts of the trade and order logs containing its

trades only. In the absence of the complete trade and order log it is erroneous to concludethat the trades of the noticee were deliberately matched with each other.

(d) The noticee had traded in 89 scrips during the Investigation Period which stretches overalmost 2 years. However, only 189 trades in 21 scrips are self-trades which clearly shows thatthe said alleged self-trades are mere coincidence and are on account of the automatic andanonymous order matching system of the stock exchange.

(e) SEBI did not provide the noticee any data to show that the said alleged self-trades led tocreation of artificial volume in the scrips or that the same was done with the intention tocreate artificial volume in the scrip. In this regard, the noticee has relied upon certainobservations in the extracts of the investigation report.

(f) The investigation by SEBI, BSE and NSE did not conclude that the noticees trades had

created an artificial market or created a false or misleading appearance of trading.(g) The fact that the a particular trade was a self-trade, i.e., that the noticees buy and sell orders

in a particular scrip matched against its own orders is not known to it or to the market. It isonly known to the stock exchange/SEBI.

(h) The noticee is a trader and not merely an investor. Therefore, it is its endeavour to squareoff positions in securities at the earliest and not to take delivery of securities to the extentpossible.

(i) During the Investigation Period, the noticee had traded in 89 scrips for 687 days and hadexecuted alleged 189 self-trades in 21 scrips. Out of these 189 alleged self-trades, the timedifference in respect of 111 alleged self-trades was around 10 minutes.

(j) The gross buy and gross sell volume of the noticee was insignificant during the 1st period andthe 2nd period.

(k) During the 1 st period, at BSE the percentage of the noticee's trades to the market volumeranged from 0 to 5.16% and he had made a loss of ` 53.09 lakhs while trading in 37 scrips. At

NSE, the noticees trades were not very significant and he had made a loss of ` 8,502/- whiletrading in 16 scrips.

(l) During the 2 nd period, the trades of the noticee in 3 scrips at BSE exceeded 10% of the

market volume. At NSE, the volume of trades of the noticee in 8 scrips was less than 1% ofthe market volume and he had suffered a loss of ` 30,747/-.

(m) Considering the above, SEBI did not further analyse or investigate the trades of the noticeeexcept for its trades in the scrip of Softech Infinium Solutions Ltd. for the period of January12, 2010 to February 09, 2013 on BSE.

5. I have carefully considered the SCN issued to the noticee, his reply/submissions and the



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relevant material available on record. Before dealing with the merits of the instant case, I deemit necessary to deal with the preliminary issue raised by the noticee in his reply/submissions. Inote that during the instant proceedings, the noticee had asked for the relevantdetails/documents like the complete trade and order log, copies of the Investigation Report and

reports submitted to SEBI by BSE and NSE based on which the SCN was issued to him. Inthis regard, I note that the noticee has been provided with the relevant trade and order log withrespect to the alleged self-trades executed by him, along with the SCN dated January 10, 2014.

As regards the contention of the noticee for furnishing of the extract or copy of theInvestigation Report, I note that the Investigation Report is not evidence relied upon in theSCN issued to the noticee. The findings of the Investigation Report have been narrated in theSCN which is a self-contained document containing all the allegations and charges against thenoticees. The SCN also clearly mentions the provisions of law alleged to have been violated byhim and the basis of charges against him. In my view, no prejudice would be caused to the

noticee if the Investigation Report or its extract is not provided to him. Nonetheless, therelevant extract of the Investigation Report related to the noticee has already been provided tothe him vide letter dated March 4, 2014 and no reliance has been made on any document whichhas not been provided to the noticee while arriving at finding in this order. In my view, noprejudice would be caused to the noticee if only the relevant extract of the Investigation Reportis provided to him.

6. Coming to the allegations leveled against the noticee, I note that during the Investigation Periodthe noticee had traded in a total of 89 scrips and the gross buy and sell value of the same were

approximately ` 28.48 crores and ` 28.74 crores, respectively. Out of these, on 189 instances thenoticee himself was the buy as well as the sell client in respect of 75,725 shares in 21 scrips. Inote that these facts have not been disputed by the noticee. With regards to such trades wherethe buy and sell client is the same, it is relevant to mention the order of the Honble Securities

Appellate Tribunal (the Honble SAT) in the matter of M/s. Jayantilal Khandwala & Sons Pvt. Ltd.vs. SEBI (Appeal no. 24 of 2011 decided on June 8, 2011) whereby it has held that: one cannotbuy and sell shares from himself. Such transactions are obviously fictitious and meant only to create falson the trading screen of the exchange. In view of these facts, I find that the noticee has indulged inself-trades in respect of 75,725 shares in 21 scrips on 189 instances.

7. The noticee has contended that his alleged self-trades were merely a coincidence and that he was not aware of the same on account of the automatic and anonymous order matchingsystems of the stock exchanges. I note that the noticee has indulged in self-trades in 75,725shares of 21 scrips on 189 instances. Moreover, out of these 189 instances, the time differencein respect of 55 self-trades accounting for 12,626 shares in 14 scrips was less than a minute, as



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described in Table 2 above. The fact that on a substantial number of occasions the noticee hasindulged in self-trades puts to rest the contention of the noticee that his trades were coincidenceand that he was not aware of the same. The proximity in the time of such self-trades and thenumber of instances of such self-trades clearly imputes pre-conceived motive of the noticee to

create a false and misleading appearance of trading in the said scrips. In view of these facts andcircumstances, I find that the noticee has indulged in self-trades in respect of 75,725 shares of21 scrips on 189 instances without any intention to effect change in the beneficial ownership ofsuch shares. Self-trades per se do not result in change in ownership of shares and hence, frequentindulgence in the same by anyone can only be for the purpose of artificially increasing the

volume of trading in the relevant scrip. I, therefore, do not find merit in the submission of thenoticee that these self-trades were merely a coincidence and that he was not aware of the sameon account of the automatic and anonymous order matching systems of the stock exchanges.

The above self-trades did not intend to effect change in beneficial ownership of traded shares

and were, therefore, illegal. It is relevant to mention that with regard to the nature and effect ofself-trades the Honble SAT, in the matter of M/s. Jayantilal Khandwala & Sons Pvt. Ltd. vs. SEBI (Appeal no. 24 of 2011 decided on June 8, 2011), has held that: one cannot buy and sell shares fromhimself. Such transactions are obviously fictitious and meant only to create false volumes on the tradingthe exchange.

8. The noticee has submitted that his gross buy and gross sell volume was insignificant during the1st period and the 2 nd period and that he had incurred losses in his trades during the said period.In this regard, the noticee has relied upon certain extracts of the Investigation Report. I have

perused the said extracts of the Investigation Report and note that the findings in the saidextracts of the Investigation Report do not pertain to the allegation of self-trades and as suchhave not been relied upon in the SCN. Nonetheless, the allegation in the instant case pertains to189 instances of self-trades accounting 75,725 shares in 21 scrips by the noticee and it has beenheld by the Honble SAT on various occasions that self-trades are fictitious and are meant onlyto create false volumes on the trading screen of the stock exchanges. In view of these facts, it isimmaterial as to whether the self-trades by the noticee resulted in creation of volume in the saidscrips or not or whether the noticee has incurred loss or made profits in his trades. In thisregard, it is relevant to mention that the Honble SAT, in the matter of M/s Marwadi Shares andFinance Limited vs SEBI (Appeal no. 85 of 2011decided on July 26, 2012) has held that: Coming to themerits of the case, we are of the view that the order passed by the adjudicating officer needs to be uphelin dispute that the appellant traded in the scrip of the company on behalf of Nathani group entities for p101 trading days during the investigation period. 200 trades involving 318 shares were alleged to be fithe buy clients and the sell clients being the same. Out of these 200 fictitious trades, 197 trades were ewith traded quantity of one share where the buying and selling party was the same. Self trades, by th



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nature, are fictitious.

9. In view of the above, I am of the view that the noticee has indulged in self-trades in 21 scripson 189 occasions in respect of 75,725 shares without the intention of change of ownership ofsuch shares and thus indulged in an act which creates false or misleading appearance of tradingin the securities market. I, therefore, find that the has contravened the provisions of regulations3(a), (b), (c), (d) and 4(1), 4(2) (a) and (g) of the PFUTP Regulations, 2003 as alleged in theSCN.

10. I, however, find few mitigating factors in this case. Firstly, the noticee has been found to haveindulged in self-trades in only 75,725 shares spread over 21 scrips as against the total volume of1,73,32,565 shares (buy and sale) in the said 21 scrips. Secondly, there is no charge of any pricemanipulation or ill gotten gain. Given these facts, the quantum of transaction of self-trades inthis case is very less likely to have any price impact in most of the scrips involved, as is borneout from Table No. 1. Considering all the facts and circumstances of the case and the mitigatingfactors, I, in order to protect the interest of investors and the integrity of the securities market,in exercise of the powers conferred upon me under section 19 of the Securities and ExchangeBoard of India Act, 1992 read with sections 11 and 11B thereof and regulation 11 of theSecurities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade PracticesRelating to Securities Market) Regulations, 2003 hereby prohibit Mr. Prashant Kamble frombuying, selling or otherwise dealing in securities, directly or indirectly, in any manner

whatsoever, for a period of one year from the date of this order.

11. A copy of this order shall be served on all recognized stock exchanges and depositories toensure that the direction given in the above para are complied with. This order shall come intoforce with immediate effect.

Sd/-

DATE: NOVEMBER 11 th , 2014 RAJEEV KUMAR AGARWAL

PLACE: MUMBAI WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

order in respect of tradings by mr. prashant kamble

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