In respect of Religare Securities Limited Page 1 of 21 ... - SEBI

In respect of Religare Securities Limited of 21

WTM/RKA/EFD / 121/2016

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

Under regulations 28(2) of the Securities and Exchange Board of India (Intermediaries)

Regulations, 2008 in the matter of trading activity of Ms. Pooja Menghani.

In respect of:

Religare Securities Limited (PAN: AAACF1152D) – Stock Broker – BSE – (SEBI

Registration Number – INB/INF/010653732); NSE – (SEBI Registration Number –

INB/INF/INE 230653732)

1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') conducted an

investigation into trades of one Ms. Pooja Menghani done through Religare Securities

Limited (hereinafter referred to as 'Religare'), a SEBI registered stock broker, for the period

June 01, 2008 to January 12, 2009 (hereinafter referred to as 'Investigation Period') in the

shares of: (1) Amtek Auto Limited (‘Amtek Auto’); (2) Amtek India Limited (‘Amtek India’);

(3) Ahmednagar Forgings Limited (‘Ahmednagar Forgings’); and (4) Monnet Ispat Limited

(‘Monnet Ispat’).

2. Religare is a member of BSE and NSE and has been granted certificate of registration to act

as a stock broker – BSE – (SEBI Registration Number – INB/INF/010653732); NSE –

(SEBI Registration Number – INB/INF/INE 230653732).

3. Pursuant to the investigations, SEBI initiated proceedings against Religare under section 12(3)

of the Securities and Exchange Board of India Act, 1992 (SEBI Act) read with Securities and

Exchange Board of India (Intermediaries) Regulations, 2008 ('Intermediaries Regulations')

and appointed a Designated Authority (hereinafter referred to as the “DA”).

4. After completing the proceedings, the DA submitted his Report dated July 09, 2014

(hereinafter referred to as the “Report”) wherein he, inter alia, found as under :

(1) During the investigation period, Ms. Pooja Menghani trading through Religare, Narayan

Securities Pvt. Ltd. (‘Narayan’), India Infoline Securities Ltd. (‘India Infoline’) and ISF

Securities Ltd. (‘ISF Securities’) had bought and sold equal quantities of shares in large

volume in four scrips of Amtek Auto, Amtek India, Monnet Ispat and Ahmednagar Forgings.

(2) She had traded during the entire investigation period. However, her trades in the above

four scrips were limited to a few days. Further, majority of her trades were on the days


when large buy trades of Live Star Marketing Pvt. Ltd. (‘Live Star’) and MSR Marketing

Pvt. Ltd. (‘MSR Marketing’) were undertaken through Religare, and of SRS Portfolio Ltd.

(‘SRS Portfolio’) through the stock broker Sunglow Capital Services Ltd. (‘Sunglow’). (Live

Star, MSR Marketing and SRS Portfolio are hereinafter collectively referred to as ‘Major

Buyers’)

Trading in shares of Amtek Auto:

(3) The details of trading of Ms. Pooja Menghani in Amtek Auto is as under:

Date Stock

Broker for

Pooja

Pooja’s Buy

quantity

Pooja’s

Sell

quantity

Major

Buy

client

Stock

Broker of

Major

buyer

Matched

Buy

Quantity

of Major

Buyer

Total

Buy

Quantit

y of

Major

Buyer

02/07/08 India Infoline 40 ---- -- --- --- ------

03/07/08 Narayan 16,275 16,275 SRS Sunglow 7,139 101,273

15/10/08 Religare 50,000 50,000 MSR Religare 50,000 121,000


17/10/08 Religare 6,324 6,324 CF1 Sunglow 5,717 67,000





07/11/08 ISF 18,180 18,180 MSR Religare 15,033 23,700

10/11/08 ISF 34,560 34,560 MSR Religare 29,005 43,000

12/11/08 ISF 10,000 10,000 MSR Religare 9,843 20,000

17/11/08 Religare 40,000 40,000 ---- ---- ---

26/11/08 ISF 50,000 50,000 MSR Religare 50,000 52,039

28/11/08 ISF 2,362 2,362 ---- ----- ----

Total

3,69,954

3,69,914

3,08,946

7,08,986

(4) From the above table it is observed that Ms. Pooja Menghani traded in the scrip of

Amtek Auto through Religare for 15 days whereby she had bought 3,69,954 shares and

sold 3,69,914 shares. Further, on 14 days, Ms. Pooja Menghani squared off position at

the end of each day. Out of 15 days, on 10 days, sell orders of Ms. Pooja Menghani

matched with the buy orders placed by MSR Marketing through Religare constituting

2,96,090 shares, which is 80.4% of gross sell volume of Ms. Pooja Menghani.

(5) It is also observed that Ms. Pooja Menghani was buying and selling equal quantities on all

days except on July 2, 2008 when she bought only 40 shares. It is noticed that out of 15


instances, only in 3 instances Religare was not the stock broker at either side (buy/sale).

In 6 instances, the Religare was the stock broker of both Ms. Pooja Menghani as well as

MSR Marketing and on other 6 instances, Religare was at one side of order and on other

side other stock broker was there. Thus, in 12 instances, Religare was acting as stock

broker for Ms. Pooja Menghani or Major Buyers. Therefore, Religare was acting as stock

broker for Ms. Pooja Menghani in major instances.

(6) A detailed analysis of order time of Ms. Pooja Menghani and MSR Marketing during the

investigation is as under:

Date Pooja’s Buying/

(Selling)

Period (Order Log)

Pooja’s Limit

Price range

Sell LTP prior

to order entry

MSR Marketing

Buy order period

MSR

Marketing

Buy Limit

Price

15/10/2010 12:01:05 to 15:17:09 101.5 to 105 NA NA NA

15:11:13 to 15:11:52 108.5 to 109 102.6 15:12:35 to 15:24:53 102 to 110

16/10/2008 13:05:56 to 14:39:23 93 to 103 NA NA NA

14:39:51 105 101 14:39:56 to 14:40:32 102 to 105

20/10/2008 12:32:23 to 15:14:33 100.5 to 103 NA NA NA

15:13:39 to 15:15:00 105.5 to 106 103 to 103.9 12:40:43 to 15:17:58 101.5 to 106

23/10/2008 10:19:27 to 12:52:16 85 to 87 NA NA NA

13:53:46 89.9 89.1 10:21:39 to 14:15:40 85 to 90

24/10/2008 12:20:56 to 12:21:07 66.5 to 67 NA NA NA

13:03:24 69 68.05 12:41:50 to 13:04:50 67.5 to 69

31/10/2008 14:33:51 to 15:11:32 72 to 73 NA NA NA

15:13:46 75 72.5 15:00:32 to 15:16:54 72 to 75.5

07/11/2008 13:21:12 to15:16;22 69 to 71 NA NA NA

15:02:46 to 15;23:54 70 to 70.9 70.6 to 71.9 15:08:37 to 15:25:11 70 to 70.9

10/11/2008 11:24:33 to 13:49:40 68.5 to 69.6 NA NA NA

13:40:25 71 69.95 14:28:12 to 14:28:55 71

12/11/2008 14:38:40 to 15;02:25 63.5 to 64.5 NA NA NA

15:08:13 65.8 63.35 15:10:58 to 15:18:52 64 to 66

26/11/2008 13:23:54 to 15:22:47 45.85 to 50.5 NA NA NA

15:23:34 49.80 49.4 15:23:33 49.85

(7) It is observed that on the days when Ms. Pooja Menghani's sell orders have matched

with the buy orders of MSR Marketing, she placed orders at lower price prior to the buy

orders of MSR Marketing. Further, Ms. Pooja Menghani’s sell order limit price was always

above the sell LTP prior to the order entry, and was almost same or very close to the buy

limit price of MSR Marketing. The price volume data for the trading in the scrip of Amtek

Auto on the days when Ms. Pooja Menghani’s sell orders have matched with the buy

orders of MSR Marketing was as follows:


Sl. No. Date Open

Price

High

Price

Low Price Close Price Total

Traded

Quantity

1 15-Oct-08 106.85 109.35 101.5 105.85 256613

2 16-Oct-08 97 106 87 103.05 116841

3 20-Oct-08 103 106 100.05 104.5 127873

4 23-Oct-08 82.25 90.4 81.05 83.7 431762

5 24-Oct-08 82 82.8 58.1 74.05 240516

6 31-Oct-08 73.1 75 70.5 73.5 224809

7 7-Nov-08 70 74 66.5 70.3 197893

8 10-Nov-08 70 71.95 68.5 69.6 190474

9 12-Nov-08 63 65.8 62.25 64.45 131920

10 26-Nov-08 43.8 50.85 43.4 49.05 208699

(8) From the above table, it is observed that the price of Amtek Auto was continuously

falling over this period as the scrip which opened at `106.85 on October 15, 2008 and

finally closed at `49.05 on November 26, 2008. It is observed that around `56 fell down

(around 52%) in the said scrip within just 42 days. On comparing the price volume table

with the table containing analysis of orders placed by Ms. Pooja Menghani and MSR

Marketing, it is observed that Ms. Pooja' Menghani’s sell order limit price which was

always above the sell LTP and was same or very close to the buy limit price of MSR

Marketing. It was also close to the highest price reached on NSE on those days.

(9) Further, it is observed from the available records that the sell orders/first sell order of

Ms. Pooja Menghani on October 15, 2008, October 16, 2008, November 7, 2008 and

November 12, 2008 were immediately ahead of the first buy orders from MSR Marketing.

Religare was the stock broker for MSR Marketing on all these days. Religare was the stock

broker for Ms. Pooja Menghani on October 15, 2008 and October 16, 2008 and ISF was

the broker for Pooja on November 7, 2008, November 12, 2008 and November 26,

2008. However, it is noted that on all these days, Ms. Pooja Menghani had started buying

shares substantially (for example- 50,000 shares October 15, 2008) prior to the first buy

order from MSR Marketing.

Trading in shares of Amtek India:

(10) From NSE trade log it is observed that during June 2008 to January 2009, Ms. Pooja

Menghani had traded on the following days:


Date Broker for

Pooja

Menghani

Pooja’s

Buy

quantity

Pooja’s

Sell

quantity

Counter

Major

Buy

client

Counter

Sell

Broker of

Major

client

Matched

Buy

Quantity of

Counter

Major Buy

client

Total Buy

Quantity

of Major

Buy Client

1/07/2008 Religare 10,000 10,000 CF3 Sunglow 9,999 136,104

Narayan 10,000 10,000 CF3 Sunglow 8,459

11/11/2008 ISF 26,805 26,805 MP3252 Religare 26,418 35,000

12/11/2008 ISF 10,000 10,000 MP3252 Religare 10,000 20,000

25/11/2008 ISF 90,000 90,000 MP3252 Religare 89,996 174,000

26/11/2008 ISF 30,000 30,000 MP3252 Religare 30,000 35,767

28/11/2008 ISF 80,000 80,000 MP3252 Religare 75,343 175,000

01/12/2008 ISF 90,000 90,000 MP3252 Religare 90,000 149,000

02/12/2008 ISF 90,000 90,000 MP3252 Religare 88,032 254,000

03/12/2008 ISF 90,000 90,000 MP3252 Religare 90,000 222,420

04/12/2008 ISF 102,481 102,481 MP3252 Religare 90,000 511,000

(MP 3252 : MSR Marketing // CF 3: SRS Portfolio)

(11) It is observed from the above table that Ms. Pooja Menghani had traded on 10 days in

the said scrip, whereby she had bought a total of 6,29,286 shares and sold the same

number of shares. Further, she has squared off her position at the end of each day. Out

of 10 days, on 9 days the sell orders placed by Ms. Pooja Menghani through ISF Securities

had matched with the buy orders placed by MSR Marketing trading through Religare,

which constitutes 93.72% of Ms. Pooja Menghani’s gross sell. Further, during the period,

Ms. Pooja Menghani was buying and selling equal quantities on each day and on 9 days

her sell orders through stock broker ISF Securities have substantially matched with the

buy orders of MSR Marketing, trading through Religare. Since, majority of the sell orders

of Ms. Pooja Menghani had matched with MSR Marketing, a detailed analysis of order

time placed during the investigation, is as under:


(Selling)

Period (Order Log)

Pooja’s Limit

Price range

Sell LTP

prior to order

entry

MSR Marketing

Buy

order period

MSR

Marketing

Buy Limit

Price

11/11/2008 13:44:24 to 15;17:56 38.5 to 39 NA NA NA

15:22:56 38 to 40.6 39.15 15:23:09 to

15:23:36

40.65 to 40.7

12/11/2008 13:26:48 to 14:49:10 39 NA NA NA

15:07:32 40.7 39 15:11:31 to

15:19:29

40 to 41

25/11/2008 11:31:59 to 14:15:10 18.9 to 19 NA NA NA


14:15:29 20.25 to 20.5 19 14:16:09 to

14:16:59

20.5

26/11/2008 12:26:50 to 15:09:43 19.5 to 21 NA NA NA

15:16:30 21.65 20.55 15:16:33 21.65

28/11/2008 14:56:06 to 15:17:49 21.5 to 22.5 NA NA NA

15:18:31 21.25 to 23.3 22 15:17:16 to

15:20:30

23.3 to 23.35

1/12/2008 13:35:35 to 15:09:00 21.9 to 22.1 NA NA NA

15:09:21 23.9 22 15:10:23 to

15:10:28

24

2/12/2008 13:47:07 to 14:38:35 21 to 21.6 NA NA NA

15:09:28 22.5 to 23.2 21.2 15:09:36 to

15:11:19

22.5 to 23.25

3/12/2008 12:54:36 to 15:09:24 20.95 to 22 NA NA NA

15:08:58 22.5 21.3 15:10:12 to

15:13:22

22.5 to 23.1

4/12/2008 14:02:11 to 14;37:45 21.9 to 22.1 NA NA NA

14:17:04 to 14:29:17 22.75 to 23.1 21.95 to 23.25 14:17:49 to

14:25:48

23 to 24.1

(12) Further, the NSE price volume data for the trading in the scrip of Amtek India on the

days when Ms. Pooja Menghani’s sell orders have matched with the buy orders of MSR

Marketing was as follows:

Sl. No. Date Open Price High

Price

Low

Price

Close

Price

Total Traded

Quantity

1 11-Nov-08 38.35 40.8 38.1 40.35 94519

2 12-Nov-08 42 42 38 40 40579

3 25-Nov-08 19.25 20.7 18.6 19.65 377453

4 26-Nov-08 20.5 21.65 19.15 21.25 107535

5 28-Nov-08 21.7 23.3 20.55 22.45 341634

6 1-Dec-08 22.3 24 20.75 22.75 434390

7 2-Dec-08 21.45 23.2 20.55 22.05 903918

8 3-Dec-08 21 22.85 20.6 22.3 589060

9 4-Dec-08 21.6 23.5 20.6 21 1342845

(13) It can be observed that price of Amtek India was also falling over this period as the scrip

which opened at `38.35 on November 11, 2008 finally closed at `21 on December 04,

2008. On comparison of the price volume table with the table containing analysis of

orders of Ms. Pooja Menghani and MSR Marketing, it is observed that Ms. Pooja

Menghani’s sell order limit price which was above the sell LTP and was close to the buy

limit price of MSR Marketing, was also close to the highest price reached on NSE on

those days.


(14) It is also observed that the sell order/first sell order of Ms. Pooja Menghani was

immediately prior to the first buy order of MSR Marketing on all the above days except

on November 28, 2008. ISF Securities was the stock broker for Ms. Pooja Menghani and

Religare was the stock broker for MSR Marketing on these days.

(15) From the above, it is observed that in the scrip of Amtek India, in all 11 instances on ten

days, except for the trade on July 01, 2008, Ms. Pooja Menghani and the Major Buyers

(MSR Marketing) were placing their respective orders through different stock brokers.

However, the fact cannot be ignored that since Mr. Deepak Khurana was having

information of price/quantity of MSR Marketing's order and it is not necessary that to

communicate such information, Religare should also be on other side as stock broker for

Ms. Pooja Menghani, as such information can be communicated by Religare through

various modes including telephonic discussions (such telephonic discussion in fact is

admitted in statement of Ms. Pooja Menghani and reply of Mr. Deepak Khurana).

Trading in shares of Ahmednagar Forgings:


Menghani had traded in the scrip of Ahmednagar Forgings on the following days:

Date Broker for

Pooja

Menghani

Pooja’s

Buy

quantity

Pooja’s

Sell

quantity

Counter

Major

Buy

client

Counter

Sell Broker

of Major

client

Matched Buy

Quantity of

Counter

Major Buy

client

Total Buy

Quantity of

Major Buy

Client

04/07/2008 Narayan 12,000 12,000 CF3 Sunglow 11,998 54,169




17/07/2008 Narayan 647 647 CF3 Sunglow 647 6,339



22/07/2008 Narayan 4,669 4,669

21/10/2008 Religare 90,000 90,000 MP3252 Religare 90,000 124,617




11/11/2008 ISF 21,000 21,000 MP3252 Religare 21,000 35,000

12/11/2008 ISF 9,347 9,347 MP3252 Religare 9,347 20,000

17/11/2008 ISF 75,000 75,000 MP3252 Religare 74,999 139,939

03/12/2008 ISF 38,038 38,038 MP3252 Religare 37,236 50,000

Total 5,40,264 5,40,264 5,20,174 10,79,124

(MP 3252: MSR Marketing // CF 3: SRS Portfolio)


(17) It is observed from the above table that during the investigation period, Ms. Pooja

Menghani had traded for 16 days, whereby she had bought a total of 5,40,264 shares and

sold the same numbers of shares without taking delivery of shares. She had squared off

her position at the end of each day.

(18) It is also observed that her trades were concentrated on few days in July 2008 when on 8

days her sell orders through stock broker Narayan have substantially matched with the

buy orders of SRS Portfolio trading through stock broker Sunglow. Since, the said

orders/trades were executed by Ms. Pooja Menghani and SRS Portfolio through different

stock brokers and not through Religare, hence the same are not considered against

Religare.

(19) However, on another 8 days in October/November/December 2008, her sell orders

through Religare/ISF Securities have substantially matched (around 97%) with the buy

orders of MSR Marketing trading through stock broker Religare. It is also noticed that in 4

instances/orders/trades, Religare was the stock broker for both Ms. Pooja Menghani as

well as MSR Marketing. The analysis of orders placed by Ms. Pooja Menghani, SRS

Portfolio and MSR Marketing is as under:

Orders placed by Ms. Pooja Menghani and MSR Marketing

Date Pooja Menghani’s

Buying/ (Selling)

Period (Order Log)

Pooja

Menghani’s

Limit

Price range

Sell LTP

prior to

order entry

MP3252

(MSR) Buy

order period

MP3252

(MSR) Buy

Limit Price

21/10/2008 12:28:20 to 13:14:35 45 NA NA NA

13:38:59 to 13:39:47 53.5 to 54.5 48 to 48.9 13:15:27 to

13:43:29

45 to 55

24/10/2008 11:13:31 to 15:17:05 33 to 39.25 NA NA NA

11:51:06 to 15:23:07 35 to 39 32.5 to

38.35

11:53:54 to

15:23:34

33 to39

3/11/2008 11:44:10 to 15:15:16 32 to 37.5 NA NA NA

13:07:12 to 15:18:19 36.45 to 36.95 32.9 to 34.4 11:48:00 to

15:18:37

32 to 37

4/11/2008 12:03:31 to 12:06:29 32.5 NA NA NA

13;50:53 to 13:51:30 35 to 37.4 33.5 13:42:00 to

13:59:10

32.5 to 38

11/11/2008 13:24:44 to 14:08:57 31.5 to 32.1 NA NA NA

14:54:01 33 31.2 14:59:31 to

14:59:56

33 to 33.05

12/11/2008 13:26:57 to 14:49:45 29.85 to 30.5 NA NA NA

15:05:36 31.8 30 15:10:22 to

15;19:16

31 to 32


17/11/2008 12:28:58 to 13:45:22 25.55 to 26.25 NA NA NA

14:00:40 27.5 25.55 13:21:46 to

14;01:15

25.55 to 27.55

3/12/2008 13:35:55 to 14:42:46 21.95 to 22 NA NA NA

15:14:54 22 to 23 22 15:15:15 23

(20) From the above table, it is observed that on the days when Ms. Pooja Menghani’s sell

orders have matched with the buy orders of MSR Marketing, she has bought at lower

prices prior to the buy orders of MSR Marketing. Further, her sell order limit price was

above the sell LTP prior to the order entry, but was close to the buy limit price of MSR

Marketing. Further, the sell order / first sell order placed by Ms. Pooja Menghani were

immediately ahead of the first buy orders of MSR Marketing on October 24, 2008,

November 11, 2008, November 12, 2008 and December 3, 2008. Religare was the stock

broker for Ms. Pooja Menghani as well as MSR Marketing on October 21 and 24 and

November 03 and 04 of 2008. On the other days, ISF Securities was the stock broker for

Ms. Pooja Menghani and Religare was the stock broker for MSR Marketing.

(21) The NSE price volume data for the trading in the scrip of Ahmednagar Forgings on the

days when Ms. Pooja Menghani’s sell orders have matched with the buy orders of MSR

Marketing, are as follows:

Sl. No. Date Open Price High Price Low Price Close Price Total Traded

Quantity

1 21-Oct-08 50.05 54.5 45 47.85 291085

2 24-Oct-08 40 40 31.45 33.8 152777

3 3-Nov-08 37 37.3 32 35.35 529082

4 4-Nov-08 35 37.4 32.25 34 534195

5 11-Nov-08 32.2 33 30.7 31.3 89370

6 12-Nov-08 31.9 31.9 29.2 30.9 59411

7 17-Nov-08 28.5 28.5 25.55 25.55 321104

8 3-Dec-08 22.5 23 21.25 22.85 165389

(22) As observed from the above table, price of the scrip of Ahmednagar Forgings was falling

over this period as the scrip which opened at `50.05 on October 21, 2008 finally closed

at `22.85 on December 03, 2008. When the above price volume table was compared

with the table containing analysis of orders of Ms. Pooja Menghani and MSR Marketing,

it is revealed that Ms. Pooja Menghani’s sell order limit price which was always above the

sell LTP and was same or very close to the buy limit price of MSR Marketing, was also

close to the highest price reached on NSE on those days.

Trading in shares of Monnet Ispat:


Menghani has traded in the scrip of Monnet Ispat on the following days:


Date Broker for

Pooja

Menghani

Pooja’s

Buy

quantity

Pooja’s

Sell

quantity

Counter

Major

Buy

client

Counter

Sell

Broker of

Major

client

Matched Buy

Quantity of

Counter

Major Buy

client

Total Buy

Quantity of

Major Buy

Client

27/06/2008 Religare 10000 10000 ML526 Religare 5000 70000

India Infoline 2500 2500 ML526 Religare 1500

30/06/2008 Religare 5000 5000 LP187 Religare 5000 184501

India Infoline 2000 2000 LP187 Religare 2000

Narayan 10000 10000 LP187 Religare 10000

01/07/2008 Religare 5000 5000 LP187 Religare 5000 27166

India Infoline 2500 2500 LP187 Religare 2500

Narayan 10000 10000 LP187 Religare 5465

02/07/2008 Narayan 8000 8000 LP187 Religare 8000 33858





(LP187: Live Star)

(24) Ms. Pooja Menghani had traded in the said scrip for 8 days from June 27, 2008 to July

09, 2008 wherein she was buying and selling equal quantities on each day. She had

bought a total of 87,700 shares and sold the same numbers of shares. On 7 days, her sell

orders through stock brokers Religare / India Infoline / Narayan have substantially matched

with the buy orders of Live Star who was trading through Religare, which constitutes

74.57% of her gross trading.

(25) On two days, Religare was the stock broker at both side of Ms. Pooja Menghani and Live

Star. It is also observed that majority of the sell orders of Ms. Pooja Menghani had

matched with the buy orders of Live Star. A detailed analysis of order time of Ms. Pooja

Menghani and that of Live Star done revealed as under:


(Selling) Period (Order Log)

Pooja’s Limit Price range

Sell LTP prior to order entry

LP187 Buy order period

LP187 Buy Limit Price

30/06/2008 (R) 10:48:46 520 NA NA NA

(N) 10:52:01 to 11:36:37 519 to 520

(I) 10:51:51 520

(R) 11:34:24 519.95 to 530 519 09:55:25 to 15:22:36

515 to 531

(N) 11:37:00 520 to 530 520

(I) 11:31:22 520 to 530 519.7

01/07/2008 (R) 11:12:38 to 12:47:27 510 to 512 NA NA NA

(N) 11:08:30 to 12:51:12 510 to 513

(I) 11:58;06 510

(R) 13:34:16 515 510 10:04:54 to 15:17:18

495 to 525

(N) 13:39:33 to 14:02:29 508 to 512 512 to 515.95


(I) 13:29:21 510 to 514 510

02/07/2008 12:25:21 to 14:10:17 485 to 490 NA NA NA

14:10:58 497 490 11:15:16 to 15:29:05

465 to 510

03/07/2008 11:13:22 to 11:23:41 485 NA NA NA

15:20:49 to 15:24:43 490 490 to 496 13:29:39 to 15:25:41

467 to 500

04/07/2008 11:44:52 to 14:39:50 487 to 494 NA NA NA

14;38;45 499 495 14:48:04 to 15:29:47

496 to 510

07/07/2008 14:03:55 to 15:22:14 505 to 509.5 NA NA NA

15:24:04 to 15:51:37 510 509 10:35:07 to 15:50:16

509.05 to 520

09/07/2008 13:53:07 to 14:25:08 501 to 502.5 NA NA NA

14:26:45 to 15:27:18 503.1 to 507 502 to 505.95 14:56;32 to 15:29:50

497 to 510

(26) The NSE price volume data for the trading in the scrip of Monnet Ispat on the days when

Ms. Pooja Menghani’s sell orders matched with the buy orders of Live Star is as follows:

Sl. No. Date Open

Price

High

Price

Low

Price

Close

Price

Total Traded

Quantity

1 30-Jun-08 524.95 530 503 517.45 268000

2 1-Jul-08 511.15 525 476.25 498.55 140372

3 2-Jul-08 504.65 509.75 462 497.4 83337

4 3-Jul-08 485 502 463 493.8 77118

5 4-Jul-08 492 505 483 501 36054

6 7-Jul-08 515 529 501 509.05 54187

7 9-Jul-08 548.9 558.9 495.1 504.5 100203

(27) From the above table, it can be observed that price of Monnet Ispat was falling over this

period as the scrip which opened at `524.95 on June 30, 2008 has closed at `504.5 on

July 09, 2008. Further, as usual like aforesaid scrips, it is observed that on the days when

Ms. Pooja Menghani’s sell orders matched with the buy orders of Live Star, she had

bought at lower prices prior to the buy orders of Live Star. Further, her sell order limit

price was above the sell LTP prior to the order entry, and was close to the buy limit price

of Live Star.

(28) On July 03, 2008 and July 04, 2008, Ms. Pooja Menghani placed her sell order

immediately ahead of the buy order from Live Star. Ms. Pooja Menghnai was placing

order through stock broker Narayan whereas the counterparty stock broker was Religare.

(29) Keeping in view the aforesaid facts and analysis of the trading of the client Ms. Pooja

Menghani which was executed through Religare in the aforesaid four scrips, the following

are key points:

(a) Substantial number of shares was purchased/sold by Ms. Pooja Menghani in the


aforesaid 4 scrips and almost 100% squared off by her on the same day.

(b) Considerable instances wherein Religare was the stock broker for both Ms. Pooja

Menghani and other Major Buyers.

(c) There are considerable instances where the sell orders/first sell orders of Ms. Pooja

Menghani were immediately ahead of the large buy orders of the Major Buyers and

same were executed through Religare.

(d) Ms. Pooja Menghani's sell order limit price was always above the sell LTP or very

close to the buy limit price of the Major Buyers.

(30) Further, the fact of placing orders consistently by Ms. Pooja Menghani ahead of the large

buy orders of Major Buyers and that her trades were limited to a few days in the four

scrips, indicate that her trading ahead of the large buy orders cannot always be a

coincidence, but were done with a prior knowledge regarding the imminent large buy

orders of Major Buyers.

(31) It is an established fact that Mr. Deepak Khurana had introduced Ms. Pooja Menghani to

Religare and was placing orders for both Ms. Pooja Menghani as well as the Major Buyers

on several occasions. Certainly, such orders were placed by Ms. Pooja Menghani upon

receiving information from Religare/Mr. Deepak Khurana about imminent orders of the

Major Buyers as alleged.

(32) As regards to the income of Ms. Pooja Menghani, it was submitted by Religare that Ms.

Pooja Menghani was maintaining running account of funds and securities with it and her

trading was allowed based on standard risk and margin procedures. However, in support

of such contention, no documentary proof were filed in the proceeding.

(33) As regards the contention of Religare that it is a normal practice for the dealers to interact

with clients to discuss market behaviour, it is relevant to mention here that Ms. Pooja

Menghani was not shown to be a High Networth Individual or/ Institutional Investor

wherein some stock broker would discuss over phone about market behaviour, especially

when Religare was having thousands of other clients in the same branch.

(34) The contentions of Religare that nominal percentage of such transactions took place from

its platform, source of passing information was some other third person outside Religare

and that only `28.9 lac was booked by Ms. Pooja Menghani through Religare and

remaining `19.1 lac was booked through other stock brokers, are not tenable in view of

the Hon'ble SAT order in the matter of Ms. Pooja Menghani vs. SEBI (Appeal No.

20/2014 – order dated April 23, 2014), whereby the Hon’ble SAT has upheld the

adjudication order in respect of Ms. Pooja Menghani.

(35) Since, Mr. Deepak Khurana who was one of the branch heads of Religare, had placed


such orders from its platform, hence, being a registered stock broker, Religare should

have exercised adequate care/caution and should have suitably advised/cautioned its

employees about the practices to be followed in its business. Under law, duty is cast

upon the registered stock broker to adequately instruct its employees to render fair

services to its clients and not to indulge in any kind of manipulative/fraudulent activities

during the course of its business. As observed above, such kinds of trading was assisted

by Religare to Ms. Pooja Menghani for a long time viz. from July to December 2008.

Apparently, there was failure on the part of Religare in adopting due diligence and also

there was indulgence on its part in front running/manipulative/fraudulent activities.

Undoubtedly, passing of such information/front running assisted Ms. Pooja Menghani

in placing buy orders for shares at lower price and subsequently selling them at higher

price which resulted into huge profit of around `28.9 lakh to her through Religare.

Therefore, the allegations as levelled in the SCN dated June 20, 2011 against Religare,

stands established.

(36) Religare had violated clauses A(1), A(2), A(3), A(4), A(5) and B(3) of the code of conduct

for stock brokers as prescribed under Schedule II of regulation 7 of the Stock Brokers

Regulations. The violation of clause B(8) under Schedule II of regulation 7 of the Stock

Brokers Regulations does not stand established in the given facts/circumstance of the

case.

5. In view of the above findings, the DA found that Religare had violated clauses A(1), A(2),

A(3), A(4), A(5) and B(3) of the code of conduct for stock brokers as prescribed under

Schedule II of regulation 7 of the Stock Brokers Regulations. The DA also observed that

violation of Clause B(8) under Schedule II of regulation 7 of the Stock Brokers Regulations

does not stand established in the given facts/circumstance of the case. Based on the findings

as above, the DA recommended suspension of certificate of registration of Religare for a

period of one month. The relevant provisions are reproduced as hereunder:

Regulation 7:

The stock-broker holding a certificate shall at all times abide by the Code of Conduct as specified at Schedule II.

Schedule II

A. GENERAL

(1) INTEGRITY: A stock-broker, shall maintain high standards of integrity, promptitude and fairness in the

conduct of all his business.

(2) EXERCISE OF DUE SKILL AND CARE: A stock-broker, shall act with due skill, care and

diligence in the conduct of all his business.

(3) MANIPULATION: A stock-broker shall not indulge in manipulative, fraudulent or deceptive transactions

or schemes or spread rumours with a view to distorting market equilibrium or making personal gains.

(4) MALPRACTICES: A stock-broker shall not create false market either singly or in concert with others or

indulge in any act detrimental to the investors interest or which leads to interference with the fair and smooth

functioning of the market. A stock-broker shall not involve himself in excessive speculative business in the market


beyond reasonable levels not commensurate with his financial soundness.

(5) COMPLIANCE WITH STATUTORY REQUIREMENTS: A stock-broker shall abide by all the

provisions of the Act and the rules, regulations issued by the Government, the Board and the stock exchange from

time to time as may be applicable to him.

B. DUTY TO THE INVESTOR

(3) BREACH OF TRUST: A stock-broker shall not disclose or discuss with any other person or make

improper use of the details of personal investments and other information of a confidential nature of the client which

he comes to know in his business relationship.

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

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

(8) COMPETENCE OF STOCK BROKER: A stock-broker should have adequately trained staff and

arrangements to render fair, prompt and competent services to his clients.

6. After considering the Report, a show cause notice dated November 17, 2014 (SCN), under

regulation 28(1) of the Intermediaries Regulations, was issued to Religare, calling upon it to

show cause as to why action as recommended by the DA should not be taken against it or

a higher penalty as deemed fit by the Competent Authority should not be imposed upon it.

Vide the said SCN Religare was also advised to send its reply, if any, to SEBI within 21 days

of the receipt of the SCN. When no reply was received from Religare SEBI, vide letter

dated June 9, 2015 issued a reminder to Religare advising it to submit a reply immediately

and also indicate whether it would like to avail an opportunity of hearing. Vide its letter

dated June 16, 2015, Religare stated that a reply dated December 12, 2014 had already been

submitted by it and enclosed a copy of the same. Thereafter, an opportunity of personal

hearing was granted to Religare on June 14, 2016 when Mr. Somasekhar Sunderesan,

Advocate Mr. Paras Parekh and Mr. Dhaval Kothari, advocates and Mr. Jayant Manglik,

Mr. Pradeep Kumar, Mr. Rajesh Sharma and Mr. Kaushal Mehta, the representatives of

Religare, appeared and made submissions relying upon the replies of Religare and further

emphasised that:-

(i) The instant matter pertains to 2008. The cause and effect are no longer proximate. The

case has been taken seriously though it has no merit. The Report was submitted in 2014

and two years have been taken for consideration of the Report. This cannot be the

approach for dealing with an institutional broker.

(ii) Out of 55 impugned transactions of Ms. Pooja Menghani, only 15 transactions were

through Religare. In other words, 71% of Ms. Pooja Menghani’s trades were through

entities other than Religare.

(iii) There is no adverse observation in the Report or the SCN alleging that Religare does not

train or sensitise its employees about the regulatory requirements.


(iv) Religare is a going concern. Any order for its suspension would be fatal. Recommendation

of the DA will have very wide ramification and such recommendation, if accepted, will

have the effect of winding up of the entity.

(v) In the given circumstances, after considering the submission of Religare on merits, if

Religare is found to have contravened the provisions of the SEBI regulations as alleged in

the Report or the SCN, an order for imposition monetary penalty on Religare would be

more apt than any suspension order.

(vi) In fact, in the main case against Ms. Pooja Menghani and Mr. Deepak Khurana, separate

adjudication orders were passed against these entities imposing penalty of `1 Crore and

`50 Lac, respectively on them.

(vii) The DA had absolved Religare of the charges of violation of Clause B (8) under Schedule

II of regulation 7 of the Stock Brokers Regulations. If Religare is absolved of the

allegation of violation of clause B(8) under Schedule II, then the other findings against

Religare in para 42 of the Report become non-tenable. In these circumstances, no action is

warranted against Religare.

(viii) If at all it is held in these proceedings that the lapses, as alleged in the Report, should

never have occurred, even in that case a regulatory warning would be more appropriate

course of action. In the facts and circumstances of this case, even the issuance of warning

to Religare is not sustainable and not required.

7. Religare, vide its undated letter (received on July 01, 2016), filed additional written

submission in the matter. The replies/submissions made by Religare, inter alia, are as

follows:

(i) The fundamental allegation against Religare is that there is failure on its part in adopting

due diligence and there was indulgence on its part in front running/ manipulative/

fraudulent activities by Ms. Pooja Menghani.

(ii) There is no reason for RSL to indulge in the alleged front-running. Religare has made

meagre amount of `43,000/- as brokerage from the trading by Ms. Pooja Menghani.

There is no reason for a reputed and substantial entity like Religare to indulge in allegedly

incorrect activities for such a meagre amount.

(iii) There is nothing in the Report or the Show Cause Notice to allege or demonstrate that

the systems implemented by Religare for regulating the trading by its clients was in any

manner inadequate or non-compliant with requirements prescribed by SEBI or the

exchanges. Religare is a large organization, with approximately 2000 employees spread

over approximately 180 branches along with more than 1100 sub-brokers, authorised

person locations. Religare services more than 8 lakh clients in approximately 500 cities.

Keeping in mind this scale, Religare has developed robust internal control mechanisms to


verify the details of prospective clients, monitor transactions to flag and prevent

malpractices.

(iv) Religare has suo motu reported details of suspicious transactions by its clients to exchanges.

Religare has satisfactory internal controls in place and trading is monitored.

(v) Religare's gross turnover across exchanges during 2008-09 was `1,81,984.91 crores in cash

segment and `3,69,425.91 crores in derivative segment (including currency derivatives)

(vi) The overall turnover of the trades by Ms. Pooja Menghani during 2008-09 was `9.97

crores. Ms. Pooja Menghani 's turnover accounts for only about 0.0018% of the total

turnover of Religare. Religare earned a meagre brokerage of `43,000/- from the trades by

Ms. Pooja Menghani. The charge of inadequate due diligence could not be levelled

against Religare on the basis of such negligible trading.

(vii) Since the relevant period, there have been multiple inspections conducted upon Religare

by SEBI and stock exchanges along with half yearly internal audit by external auditors.

Such inspections and audits have included in their scope overall review of the trading

mechanism and the internal controls of Religare. None of such inspections/ audits have

pointed to or alleged any flaw or deficiency in the mechanisms and systems implemented

by Religare.

(viii) Religare has incorporated, in its functioning, various systems and internal controls to

prevent misuse of its trading platform. Religare has, over time, developed and displayed

significant competence in ensuring control and reporting of transactions with exchanges

and other authorities.

(ix) Religare has effective KYC compliance requirements and the integrated surveillance

framework which ensure enhanced due diligence while accepting a client. Once a client is

on-boarded, Religare also monitors their trading activities both on the exchange as well as

off market movements.

(x) Even in relation to Ms. Pooja Menghani, Religare had carried out the requisite due

diligence by conducting stringent know your client checks and taking requisite details as

required under the law.

(xi) In the present case, given the nature of trading by Ms. Pooja Menghani, there was no

reason for Religare to believe any wrong doing on her part. Assuming whilst denying that

there was front-running in relation to the trades executed by Ms. Pooja Menghani the

trading by Ms. Pooja Menghani was effected through 4 stock brokers including Religare.

There was no reason for Religare to suspect any wrong-doing on part of Ms. Pooja

Menghani since the data at Religare could not have captured details about the same.

(xii) There were stock brokers other than Religare that had traded in the scrips at the relevant

period for Ms. Pooja Menghani. However, there have been no proceedings initiated

against them. The only basis of allegations against Ms. Pooja Menghani is the fact that

Mr. Deepak Khurana had placed the orders for Ms. Pooja Menghani as well as the Major

Buyers. However, it was not in each and every case that the trades by Ms. Pooja

Menghani were in fact around the time that the Major Buyers traded. Even assuming


without admitting that there was information to Ms. Pooja Menghani, it is apparent that

there was another party apart from Mr. Deepak Khurana who would have informed Ms.

Pooja Menghani about the trades by the Major Buyers.

(xiii) The allegations in question pertain to one of the employees of Religare. The Show Cause

Notice or the Report do not demonstrate any wrongdoing specifically attributed to

Religare in relation to the allegations against Ms. Pooja Menghani. On the other hand,

Religare has indeed demonstrated that it has systems in place to curb any illegal trading.

(xiv) All the foregoing submissions have been made without prejudice to the core point on

merits that Religare did nothing wrong and that nothing in his conduct could lead to a

reasonable inference of the need to effect a regulatory intervention. 71% of Ms. Pooja

Menghani's Trades (39) instances in the instant case, were undertaken by brokers other

than Religare. Ms. Pooja Menghani had traded through three other brokers Narayan, ISF

Securities and India Infoline. There are only 16 out of 55 instances (Amtek Auto 8/15, Amtek

India 1/11, Ahmednagar Forgings 4/16, Monett Ispat 3/13) where Ms. Pooja Menghani has

undertaken allegedly violative trades through Religare. It cannot be, therefore, alleged that

majority of the alleged front running trades took place using Religare's platform and it

failed in exercising due diligence required from a broker. An internal review of the

trading of Ms. Pooja Menghani was undertaken to check if there were any lapses on the

part of Mr. Deepak Khurana. However, no evidence was found against Mr. Deepak

Khurana regarding any illegal gain or benefit from the trades.

(xv) In 12 out of 55 instances listed in the Show Cause Notice large orders of major buyers

were placed with a stock broker names Sunglow and Ms. Pooja Menghani placed her

buy/sell orders with other stock brokers, namely Narayan and India Infoline. However,

even in these instances a similar pattern (alleged front running) has been noticed in Ms.

Pooja Menghani 's trading, which clearly indicates that there ought to have been a third

unknown person who had passed on the information regarding the large buy orders to

Ms. Pooja Menghani.

(xvi) It is evident that in total 15 instances the employee of Religare did not even possess

information on large buy orders of major buyers, as the orders were placed by these

clients with other brokers. Therefore, the question of its employee passing on such

information to Ms. Pooja Menghani does not arise in these cases. This admitted position

ought to lead to a conclusion of there being no violation on part of Religare.

8. I have carefully considered the Report, the SCN issued pursuant thereto, submissions of

Religare and other relevant material available on record. Before dealing with merits of the

case, I deem it necessary to deal with a preliminary contention of Religare, i.e., there were

stock brokers other than Religare that had traded in the scrips during the relevant period for

Ms. Pooja Menghani but no proceedings were initiated against them. In my view, the fact

that SEBI has not initiated any action against other stock brokers cannot be a reason for

absolving Religare from the alleged violations. In this regard, I also rely upon of the Hon’ble

SAT in the matter of Shraddha Stock Broking Private Limited vs SEBI (order dated December


03, 2012 - Appeal No. 162 of 2012), whereby it has held as under:

“........................the guarantee of equality before law under Article 14 of the Constitution is a positive

concept and it cannot be enforced in a negative manner. This view gets support from the principles laid

down by the Apex Court in the case of State of Bihar vs. Upendra Narayan Singh and

Ors.[(2009)5SCC65], relied upon by learned senior counsel for the Board. If the appellant has been

found to be guilty of violating the regulatory framework, it cannot claim exoneration on the ground that

no action has been initiated by the Board against another person who has been found guilty for violating

the Regulations. We may hasten to add that the regulator is supposed to adopt a uniform policy for

initiating action against persons who violated the regulatory framework but any such deviation cannot

give a right to the appellant to claim immunity from action for the violation committed by it.”

9. In view of the above, I am not inclined to accept the contention of Religare in this regard.

10. I note that DA has dropped the charge of non-compliance of clause B(8) under Schedule II

of the Stock Brokers Regulations against Religare. I note that clause B(8) mandates that a

stock-broker should have adequately trained staff and arrangements to render fair, prompt

and competent services to his clients. The charge against Religare as per Report is that

‘…there was failure on the part of the Noticee in adopting due diligence and also there was indulgence on its

part in front running / manipulative/fraudulent activities…’ Hence, the contention of Religare that

dropping the charge of non-compliance of clause B (8) would make the other allegations

non-tenable, in my opinion, is unfounded.

11. Coming to the merits of the case, it is noted that the transactions described in the SCN have

not been disputed by Religare. The charge against it is that it violated the aforementioned

provisions of the Stock Brokers Regulations. I note that for arriving at his findings in the

Report the DA has framed the following issue for consideration in para. 7 of the Report-

“The issue which arises for consideration is whether the Noticee (through Deepak who placed orders) had

failed to exercise due care, diligence and promptitude while dealing for its aforesaid clients and thereby

violated aforesaid provisions of Stock Brokers Regulations?”

12. In this regard, in his Report, at para. 42 , the DA has observed as under:

“Since, Deepak who was one of the branch heads of the Noticee, had placed such orders from the platform of

the Noticee, hence, needless to say that being a registered stock broker, the Noticee should have exercised

adequate care/caution and should have suitably advised/cautioned its employees about the practices to be

followed in its business. Under law, duty is casted upon the registered stock broker to adequately instruct its

employees to render fair services to its clients and not to indulge in any kind of manipulative/fraudulent

activities during the course of its business. As observed above, such kinds of trading was assisted by the

Noticee to Pooja for a long time viz. from July to December 2008. Apparently, there was failure on the part

of the Noticee in adopting due diligence and also there was indulgence on its part in front running /


manipulative/fraudulent activities as observed in pre- paras. Undoubtedly, passing of such information /

front running assisted her in placing buy orders for shares at lower price and subsequently selling them at

higher price which resulted into huge profit of around `28.9 lakh to her through the Noticee. Therefore, the

allegations as levelled under the SCN against the Noticee, stands established.”

13. I note from the above that while the charge against Religare, was its alleged failure to exercise

due care, diligence and promptitude while dealing for its client Ms. Pooja Menghani, the DA

gave finding that there was failure on the part of Religare in adopting due diligence and also

there was indulgence on its part in front running/manipulative/fraudulent activities. This

charge is based on facts and circumstances examined in the Report.

14. I note that Ms. Pooja Menghani had traded in the scrip of Amtek Auto for 15 days. On 14

days her position was squared off. Out of the 15 instances, only in 3 instances Religare was

not the stock broker at either side (i.e., buy/sell). That means in 12 instances, Religare was

acting as the stock broker for Ms. Pooja Menghani or Major Buyers. Ms. Pooja Menghani

traded in the scrip of Amtek India for 10 days, wherein she had traded through Religare only

on one day. However, Religare was the stock broker for MSR Marketing for 9 out of 10 days.

Ms. Pooja Menghani traded in Ahmednagar Forgings for 16 days. On 8 days Religare was the

stock broker for one side of the trade. Ms. Pooja Menghani traded in Monnet Ispat for 8 days.

In all the 8 days Religare was the stock broker on any one side of the trade. The fact of

placing orders consistently by Ms. Pooja Menghani ahead of the large buy orders of Major

Buyers and that her trades were limited to a few days in the four scrips, indicate that her

trading ahead of the large buy orders cannot always be a coincidence, but were done with a

prior knowledge regarding the imminent large buy orders of Major Buyers. It is an

established fact that Mr. Deepak Khurana had introduced Ms. Pooja Menghani to Religare

and was placing orders for both Ms. Pooja Menghani as well as the Major Buyers on several

occasions. Certainly, such orders were placed by Ms. Pooja Menghani upon receiving

information from Mr. Deepak Khurana, who was a branch manager of one of the offices of

Religare, about imminent orders of the Major Buyers as alleged.

15. It has also been brought to my notice that pursuant to the investigation in the matter,

adjudication proceedings were initiated against Ms. Pooja Menghani and Mr. Deepak

Khurana. Vide order dated April 29, 2012 the Adjudicating Officer had imposed a penalty of

`50 Lac on Mr. Deepak Khurana. The said order was challenged before the Hon’ble

Securities Appellate Tribunal (the Hon’ble SAT). Vide order dated February 17, 2016, the

Hon’ble SAT allowed Mr. Deepak Khurana to withdraw the said appeal. Similarly, vide order

dated April 30, 2012 a penalty of `1 Crore was imposed on Ms. Pooja Menghani for the

contravention of provisions of regulations 3(a) and 4(1) of the Securities and Exchange

Board of India (Prohibition of Fraudulent and Unfair Trade and Practices relating to

Securities Market) Regulations, 2003 (the PFUTP Regulations, 2003). The said order of the

Adjudicating Officer was impugned before the Hon’ble SAT. The Hon'ble SAT vide

majority order dated April 23, 2014 upheld the order of SEBI. Since then, prosecution has


been initiated against Ms. Pooja Menghani for non-payment of the penalty. In my view,

therefore, the facts of the case pertaining to the allegations qua Ms. Pooja Menghani and Mr.

Deepak Khurana have attained finality.

16. I find that in the instant case, the charge on the Religare is with regard to the observance of

code of conduct and not of violation of the provisions of 3(a) and 4(1) of the PFUTP

Regulations, 2003 as was the case for Ms. Pooja Menghani and Mr. Deepak Khurana.

17. In its defence, Religare has contended that Ms. Pooja Menghani was maintaining running

account of funds and securities with Religare and her trading was allowed based on standard

risk and margin procedures. However, in support of such contention, no documentary proof

has been filed in the proceeding. I also note that Ms. Pooja Menghani was not shown to be a

High Networth Individual or/ Institutional Investor wherein some stock broker would

discuss over phone about market behaviour, especially when Religare was having thousands

of other clients in the same branch. Therefore, the contention of Religare that it is a normal

practice for the dealers to interact with clients to discuss market behavior does not merit any

consideration.

18. I note that the SCN and the Report contain observation regarding the role of Mr. Deepak

Khurana in the trades by Ms. Pooja Menghani. The fact that Ms. Pooja Menghani had

indulged in front running with the active support of Mr. Deepak Khurana has already been

discussed above. In the instant case, Mr. Deepak Khurana was a branch head of Religare and

had placed orders on behalf of Ms. Pooja Menghani and Major Buyers using its platform.

Thus, it is an undeniable fact that its trading platform was misused by its branch manager

Mr. Deepak Khurana for the front running by Ms. Pooja Menghani and the same could not

detected by Religare despite its claims of having adequate internal controls. Further, Religare

has not produced anything to suggest that it had adequately instructed its employees to

render fair services to its clients and not to indulge in any kind of manipulative/fraudulent

activities. I, therefore, find that Religare has failed in its duty to exercise adequate

care/caution and suitably advise/caution its employees about the practices to be followed in

its business or adequately instruct its employees to render fair services to its clients and not

to indulge in any kind of manipulative/fraudulent activities.

19. On careful examination of the Report it is noted that while DA has dropped the allegation

of non–compliance of clause B(8) as aforesaid, the Report is silent as to how Religare has

failed to abide by clause B(3) of the Code of Conduct under Schedule II of the Stock

Brokers Regulations which casts a duty on the stock broker that it does not disclose or

discuss with any other person or make improper misuse of the details of personal investment

and other information of confidential nature of the client which he comes to know in his

business relationship. It also does not clearly brings out as to how Religare has failed to

comply with Code of Conduct specified in clause A(3) and A(4) of Schedule II. I also take

note of the fact that the charge against Religare as established in this case is only non-


compliance of code of conduct requirements about observance of due diligence, maintaining

high standards of integrity, etc.

20. I further note that Religare is an institutional stock broker and the matter pertains to the year

2008. Further, out of 55 impugned transactions of Ms. Pooja Menghani, only 15 transactions

were through Religare for which it had earned a meagre amount of `43,000/- as brokerage. In

view of the facts and circumstances discussed in the Report, in my view, it is least likely that

an institutional broker would indulge in fraudulent and manipulative activities like front

running /manipulative/fraudulent trading activities and jeopardise its business for such a

meagre amount.

21. Religare has claimed to have effective KYC compliance requirements and the integrated

surveillance framework which ensures enhanced due diligence while accepting a client and it

has incorporated, in its functioning, various systems and internal controls to prevent misuse

of its trading platform. Further, there have been multiple inspections conducted upon

Religare by SEBI and stock exchanges along with half yearly internal audit by external

auditors. Such inspections and audits have included in their scope overall review of the

trading mechanism and the internal controls of Religare. It has further submitted that none of

such inspections/audits have pointed to or alleged any flaw or deficiency in the mechanisms

and systems implemented by Religare.

22. Considering the facts and circumstances of the case and mitigating factors as aforesaid I am

of the view that a warning to Religare Securities Limited would be reasonable and

commensurate with the lapses in the instant case.

23. I, therefore, in exercise of the power conferred upon me by virtue of section 19 of the

Securities and Exchange Board of India Act, 1992, read with regulations 28(2) and 38(2) of

the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, hereby

advise Religare Securities Limited to be careful and cautious in the conduct of its stock

broking activity and to adhere to and comply with all the statutory provisions while carrying

out its activities in the securities market.

Sd/-

DATE: SEPTEMBER 20TH, 2016 RAJEEV KUMAR AGARWAL

PLACE: MUMBAI WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

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