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Oct 02, 2012, 09.50 AM IST
The Securities Appellate Tribunal on Monday upheld a penalty of Rs 5 lakh imposed by market regulator Sebi on brokerage firm India Infoline in a circular trading case.
Sebi had imposed the fine on India Infoline after finding that the brokerage firm had allowed one Sunil Mehta to trade on behalf of his mother Usha Mehta without authorisation.
The matter came to the light after Sebi’s investigation into a suspicious rise in the share price of Asia Star Company between October 10, 2008 to November 20, 2008.
Sebi's probe revealed that certain entities of one Mehta group were indulging in circular or synchronised trades to create artificial volumes in the scrip and the "kingpin of the trades" was Sunil Mehta, whose mother Usha Mehta was a client of India Infoline.
During the period under probe India Infoline had allowed Sunil Mehta to operate the account of his mother and engage in the transactions which resulted in share price manipulation, Sebi had found - necessitating action against the broker.
Following the penalty, the brokerage firm approached the tribunal against Sebi order.
The tribunal, however, observed in its order, dated today, that "since the appellant (India Infoline) did not comply with one of the fundamental requirements of member client relationship we hold that the appellant has failed to exercise due diligence and failed to act with integrity, care and skill as laid down in the stock brokers regulations."
"So the appellant has defaulted in complying with the stock brokers regulations and penalty is called for," SAT said.
The tribunal observed that India Infoline failed to submit to Sebi any authority letter from Usha Mehta authorising her son Sunil Mehta to trade on her behalf.
In a separate order last week, Sebi had imposed a penalty of Rs 30 lakh on Sunil Mehta and Rs 10 lakh on Usha Mehta for synchronised trading in shares of Asia Star Company (ASCL).
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