SC admits Sebi plea against trading, pending brokerage licence

Market regulator the Securities and Exchange Board of India (Sebi) today moved Supreme Court against appellate tribunal SAT's decision that a person who has applied for a brokerage licence can trade as a sub-broker pending his registration.

Attorney General Goolam E Vahanvati, appearing for the Sebi requested the apex court to admit the regulator's plea, saying that it needed urgent consideration.

A Bench comprising justices HS Bedi and Chandramauli Prasad has issued notice to one Aspi Noshir Gandhi.

The Securities Appellate Tribunal (SAT) had, on December 20, 2010, set aside Sebi charges against Gandhi, who was held liable for violating rules by trading during the pendency of his application for brokerage licence.

The regulator had imposed a fine of Rs 50,000 on him for trading as a sub-broker and trading on the Bombay Stock Exchange without getting registered on the exchange.

Gandhi had applied for a brokerage licence on December, 2002 but his application was pending until 2004, when he executed the trade.

The tribunal observed that there was no violation of Regulation 11 and 26 of the Sebi (Stock Broker and Sub-Broker) Regulation, 1992.

"The proviso to Rule 3 clearly enabled a person to deal as a sub-broker, if he had made an application for registration which was pending," said the SAT, adding that Sebi had imposed fine on "erroneous ground".

It rejected Sebi arguments that such rules applied only on those brokers and sub-brokers who were trading before 1992.