The broking firm was sent a show cause notice and around nine allegations with respect to violations carried out by it were listed in the notice. The firm, however, denied all the allegations and pleaded not guilty at the personal hearing granted to it.
D Sura Reddy, the Sebi-appointed AO, in his order, said, "If no cognisance were to be taken of any breach of the provisions of law and no penalty imposed thereupon, the same would send wrong signals to the market."
The allegations against KSBL ranged from failing to maintain order book, using of multiple client code, indulging in funding activities, dealing with unregistered sub-brokers, delaying money/delivery of securities to clients, failing to maintain client database, failing to redress investor grievances, continuously flouting norms despite being several times pointed out earlier and misutilisation of funds.
Sebi had appointed a Chartered Accountant (CA) firm in March 2003 to carry out inspection of KSBL for the year 2001-02 and 2002-03. A copy of the inspection report was also forwarded to the broking firm. Prior to this inspection, National Stock Exchange (NSE) had also conducted an inspection of KSBL covering various settlements from February 1, 2002 to February 31, 2002.
The AO, in his order said, "Imposition of quantum of penalty has to be decided keeping these factors also in mind, in addition to the factors laid down under Section 15 J of Sebi Act. In my view, the above penalty is commensurate with the defaults of the KSBL, in the facts and circumstances of the case."
Hanil-Era Textiles fined Rs 10 lakh by AO
Sebi-appointed AO Biju S has imposed a penalty of Rs 10 lakh on Hanil-Era Textiles Ltd for its failure to redress the investor grievances. Most of the investor grievances pertained to non-receipt of share/debenture certificate after transfer, non-receipt of interest and redemption amount on debentures, non-receipt of dividend among others.