In respect of Religare Securities Limited Page 1 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
In respect of Religare Securities Limited Page 2 of 21
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
16/10/08 Religare 28,000 28,000 MSR Religare 28,000 39,156
17/10/08 Religare 6,324 6,324 CF1 Sunglow 5,717 67,000
20/10/08 Religare 23,547 23,547 MSR Religare 23,544 41,684
23/10/08 Religare 26,605 26,605 MSR Religare 26,605 72,000
24/10/08 Religare 14,061 14,061 MSR Religare 14,060 18,134
31/10/08 Religare 50,000 50,000 MSR Religare 50,000 110,000
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
In respect of Religare Securities Limited Page 3 of 21
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:
In respect of Religare Securities Limited Page 4 of 21
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:
In respect of Religare Securities Limited Page 5 of 21
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:
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
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
In respect of Religare Securities Limited Page 6 of 21
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.
In respect of Religare Securities Limited Page 7 of 21
(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:
(16) From NSE trade log it is observed that during June 2008 to January 2009, Ms. Pooja
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
09/07/2008 Narayan 4,764 4,764 CF3 Sunglow 4,764 15,000
11/07/2008 Narayan 10,000 10,000 CF3 Sunglow 9,797 45,299
16/07/2008 Narayan 7,438 7,438 CF3 Sunglow 7,438 54,606
17/07/2008 Narayan 647 647 CF3 Sunglow 647 6,339
18/07/2008 Narayan 3,438 3,438 CF3 Sunglow 3,438 5,054
21/07/2008 Narayan 6,921 6,921 CF3 Sunglow 6,921 10,000
22/07/2008 Narayan 4,669 4,669
21/10/2008 Religare 90,000 90,000 MP3252 Religare 90,000 124,617
24/10/2008 Religare 45,986 45,986 MP3252 Religare 45,166 73,000
03/11/2008 Religare 121,016 121,016 MP3252 Religare 121,016 206,101
04/11/2008 Religare 90,000 90,000 MP3252 Religare 76,407 240,000
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)
In respect of Religare Securities Limited Page 8 of 21
(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
In respect of Religare Securities Limited Page 9 of 21
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:
(23) From NSE trade log it is observed that during June 2008 to January 2009, Ms. Pooja
Menghani has traded in the scrip of Monnet Ispat on the following days:
In respect of Religare Securities Limited Page 10 of 21
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
03/07/2008 Narayan 10000 10000 LP187 Religare 6667 29000
04/07/2008 Narayan 2700 2700 LP187 Religare 1413 10000
07/07/2008 Narayan 10000 10000 LP187 Religare 9597 15864
09/07/2008 Narayan 10000 10000 LP187 Religare 9761 50285
(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:
Date Pooja’s Buying/
(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
In respect of Religare Securities Limited Page 11 of 21
(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
In respect of Religare Securities Limited Page 12 of 21
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
In respect of Religare Securities Limited Page 13 of 21
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
In respect of Religare Securities Limited Page 14 of 21
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.
In respect of Religare Securities Limited Page 15 of 21
(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
In respect of Religare Securities Limited Page 16 of 21
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
In respect of Religare Securities Limited Page 17 of 21
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
In respect of Religare Securities Limited Page 18 of 21
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 /
In respect of Religare Securities Limited Page 19 of 21
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
In respect of Religare Securities Limited Page 20 of 21
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-
In respect of Religare Securities Limited Page 21 of 21
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