Securities Appellate Tribunal sets aside Sebi order against broker in Adani Exports case

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SummaryRegulator had said that S P J Stock Brokers had failed in executing its duties as a broker.

The Securities Appellate Tribunal (SAT) on Wednesday quashed market regulator Sebi's order against S P J Stock Brokers in a case related to fraudulent dealings in shares of Adani Exports Ltd (now known as Adani Enterprises).

In February this year, Securities and Exchange Board of India (Sebi) had slapped a fine of Rs 15 lakh on S P J Stock Brokers for indulging in fraudulent trading in Adani Exports shares and another Rs 5 lakh for violating broker norms.

However, SAT today ruled that there was "non basis" for holding that trades by S P J Stock Brokers were "carried out with a view to create artificial volume in scrip (of Adani Exports)".

Further, it noted that there was no material to indicate that the broker was "having any connection with counter-party" with whom the trades were executed.

"... it would not be proper to hold appellant (S P J Stock Brokers) guilty of violating PFUTP (Prohibition of Fraudulent and Unfair Trade Practices related to Securities Market) Regulations / Broker Regulations merely because most trades between appellant and counter-party were found to be synchronised," SAT said.

"... impugned order dated February 8, 2013 is quashed and set aside," it added.

The case relates to Sebi investigation into trading in the shares of Adani Exports between July 2004 and January 2005 and August-September, 2005.

During these periods, shares had witnessed huge spurt in volumes as well as wide fluctuations in price, the order said.

The market regulator had found that certain entities, through collusion with brokers and other clients, transacted in the shares of Adani Exports in a manner that led to creation of artificial volumes in the scrip.

According to Sebi, S P J Stock Brokers was one of the brokers who had traded substantially in the scrip of Adani Exports.

Sebi, in its order dated February 8, had said that S P J Brokers had deliberately entered into synchronised trading which lead to artificial volume creation, misled the investors and made wrongful gains.

The regulator had also said that S P J Stock Brokers had failed in executing its duties as a broker.

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