SAT sets aside Sebi's Rs 9 lakh fine on Ess Ess

SAT upholds penalty of Rs 1 lakh slapped by Sebi on Ess Ess

The Securities Appellate Tribunal (SAT) today set aside market regulator Sebi's Rs 9 lakh penalty on Ess Ess Intermediaries related to fraudulent trade practices in shares of Adani Export Ltd.

However, the tribunal upheld Rs 1 lakh fine slapped by Sebi on Ess Ess for violation of broker norms.

The SAT order said it is "inclined to do away with the penalty of Rs 9 lakh imposed upon the appellant (Ess Ess) for the alleged violation of the Prohibition of Fraudulent Unfair Trade Practices Regulations. While upholding that of Rs 1 lakh for the violation of the Code of Conduct of the Broker Regulations".

The case relates to a Sebi probe in the scrip of Adani Export between July 9-14, 2004 and August 8, 2005 to September 9, 2005, wherein the firm's share price had witnessed wide fluctuations.

It was revealed that through collusion with brokers and clients, certain entities transacted in the shares in a manner which led to the creation of artificial volumes in the scrip and consequently the projection of a false market.

In this connection, the role of the Ess Ess, a sub-broker was also probed in respect of trading undertaken by it on behalf of its client Nitin R Patel.

Based on its findings Sebi had imposed the penalties in December, 2012, following which Ess Ess had approached SAT against the regulator's order.

SAT has noted that no evidence was available on record "to establish a connection between the appellant (Ess Ess) and the alleged fraudulent transactions undertaken by Patel.

"The alleged default is the first and only aspersion cast on the appellant with respect to its business and, heretofore, has not had any of its acts called into question by any authority, regulatory or otherwise."

The tribunal observed that the sub broker had enjoyed no unfair advantage or benefit owing to the execution of trades.

SAT further observed that it had earlier decreased the penalty on Patel to Rs 2 lakh from Rs 5 lakh.

"Now, the fact of the matter is that Nitin R Patel, along with other market operators which dealt in the scrip of Adani Export, has been penalised to the extent of Rs 2 lakh, while the sub-broker appellant has been asked to pay a totally unwarranted penalty of Rs. 9 lakh," SAT noted.

However, it added that as even as a small time sub-broker Ess Ess should have been more vigilant while executing the trades in question.