Order against eight out of twenty-two stock brokers indulging in the reversal trade practice, set aside

Securities Appellate Tribunal, Mumbai: In the present case, J.P. Devadhar, J. set aside the impugned ex-parte ad-interim order of Securities and Exchange Board of India (SEBI), dated February 17,2016, against 8 out of the 22 brokers who were barred from the capital market for executing reversal trades worth Rs 8100 crore. The entities against whom the order was set aside are Guiness Securities, Achintya Securities, Basan Equity Broking, Abans Securities, RK. Stock Holding, Skung Tradelink, Sunstar Securities, MSB E-Trade Securities.

SEBI had barred 22 stock brokers including the appellants from  buying, selling or dealing in the securities market, either directly or indirectly, except as a stock broker for their existing clients in the cash segment. They were also restrained from accepting registration of any new client. Previously an interim order was passed on 20-08-2015, against 59 entities for their suspicious trade practice, at that time there was no order against the brokers who are allegedly involved in executing such trade. Later, on 17-02-2016 SEBI had barred 22 brokers from the market for misuse of stock exchange system for tax evasion and for executing reversal trade worth Rs 8100 crore to generate fictional profits or losses.

Since the investigation is still in progress, the Tribunal set aside the impugned order by SEBI against 22 stock brokers and stating the order amounts to double standards as no action is taken towards 11,228 clients who were equally involved in the fraudulent and unfair trade practice. The Tribunal also pointed out that permitting the brokers to trade in the cash segment and prohibiting them from accepting registration of any new client is also illogical as there is no basis to presume that the new clients would also indulge in unfair-trade practice. [Guiness Securities Limited  v. Securities and Exchange Board of India, Appeal No. 13 of 2016, decided on 25.02.2016]

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