SPS Share gets a relief from SAT in Rs 2.5 lakh fine case

Sebi had slapped a fine on SPS Share as the stock broker allegedly failed to disclose its shareholding details in Prudential Pharmaceuticals Ltd within stipulated period

SPS Share Brokers today got a relief from the Securities Appellate Tribunal (SAT) in a matter related to a penalty of Rs 2.5 lakh imposed on the stock broker by Sebi.

In its order SAT said that Sebi has disregarded the fact while holding SPS Share Brokers "guilty of a provision of law not even in existence when the acquisitions in question took place."

The Securities and Exchange Board of India (Sebi), in December 2012, had slapped a fine of Rs 2.5 lakh on SPS Share Brokers as the stock broker allegedly failed to disclose its shareholding details in Prudential Pharmaceuticals Ltd (PPL) within stipulated period.

The stock broker had purchased 2.5 lakh shares of PPL on April 9, 2001. However, the requirement of making disclosure under SAST (Substantial Acquisition of Shares and Takeover) Regulations was not attracted at that time because the acquisition was within the prescribed threshold limit of 5%.

However, on May 8, 2001, SPS Share Brokers had picked up another 3.5 lakh shares of the company, triggering the statutory requirement to make disclosure to the company since stock broker's stake reached 11.6% in PPL.

"... Appellant (SPS Share Brokers) has duly informed the company as well as the Ahemdabad Stock Exchange of this acquisition of 6 lakh shares which amounted to about 11.6% of the total paid-up capital of PPL," the Tribunal noted.

The Tribunal noted that the mandatory requirement of disclosing relevant information at every single stage of the acquisition after the 5% benchmark is crossed, viz, 10% or 14% or 54% or 74% was introduced only with effect from September 9, 2002.

"Appellant cannot be held guilty of violating a substantive provision which came into force on September 9, 2002 for an alleged violation which took place on April 9, 2001 and May 8, 2001," SAT noted.