SAT rejects India Infoline plea against SEBI penalty
MDT/PTI 01 October 2012

SEBI had imposed the fine on India Infoline after finding that the brokerage firm had allowed one Sunil Mehta to trade on behalf of his mother Usha Mehta without authorisation

Mumbai: The Securities Appellate Tribunal (SAT) upheld a penalty of Rs5 lakh imposed by market regulator Securities and Exchange Board of India (SEBI) on brokerage firm India Infoline in a circular trading case, reports PTI.

 

SEBI had imposed the fine on India Infoline after finding that the brokerage firm had allowed one Sunil Mehta to trade on behalf of his mother Usha Mehta without authorisation.

 

The matter came to the light after SEBI’s investigation into a suspicious rise in the share price of Asia Star Company between 10 October 2008 and 20 November 2008.

 

SEBI’s probe revealed that certain entities of one Mehta group were indulging in circular or synchronised trades to create artificial volumes in the scrip and the “kingpin of the trades” was Sunil Mehta, whose mother Usha Mehta was a client of India Infoline.

 

During the period under probe India Infoline had allowed Sunil Mehta to operate the account of his mother and engage in the transactions which resulted in share price manipulation, SEBI had found—necessitating action against the broker.

 

Following the penalty, the brokerage firm approached the tribunal against SEBI order.

 

The tribunal, however, observed in its order, dated today, that “since the appellant (India Infoline) did not comply with one of the fundamental requirements of member client relationship we hold that the appellant has failed to exercise due diligence and failed to act with integrity, care and skill as laid down in the stock brokers regulations.”

 

“So the appellant has defaulted in complying with the stock brokers’ regulations and penalty is called for,” SAT said.

 

The tribunal observed that India Infoline failed to submit to SEBI any authority letter from Usha Mehta authorising her son Sunil Mehta to trade on her behalf.

 

In a separate order last week, SEBI had imposed a penalty of Rs30 lakh on Sunil Mehta and Rs10 lakh on Usha Mehta for synchronised trading in shares of Asia Star Company.

Comments
R Balakrishnan
1 decade ago
This is a prime example of how SEBI encourages white collar crime. Instead of cancelling the license of India Infoline and putting Sunil Mehta behind bars for 30 plus years, SEBI merely extracted some money. India Infoline would not mind paying this small change for getting more clients. This becomes a business plan!!
Long live SEBI! Screw the investor.
Rakesh
Replied to R Balakrishnan comment 1 decade ago
absolutely
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