SC dismisses appeal of Angel Broking against SEBI order

Supreme Court today dismissed an appeal by Angel Broking Pvt Ltd against an order of market regulator SEBI imposing a Rs 30 lakh penalty on the company for fraudulent dealings in shares of Sterling Green Woods and violating stock broker norms.
Observing that self-trading of shares is "wrong" and "a problem", a bench comprising Justices J S Kehar and S A Bobde declined to admit the appeal against December 30, 2013 order of SEBI slapping Rs 20 lakh on Angel Broking and Rs 10 lakh on its client Angel Infin for violations of Prohibition of Fraudulent and Unfair Trade Practice (PFUTP)' regulations.

The bench did not accept the arguments of Angel Broking that self buying and self selling of shares was not illegal.
"If you self buy and self sell it's a problem... It's wrong," the bench observed.
The penalties were levied after Sebi found that Angel Broking had assisted Angel Infin in placing "fictitious trades" by acting as broker and counter-party broker to the self trades entered by the client and hence, had failed to carry out its business as a broker with due diligence.
The Sebi, in its ruling, had stated that the orders placed by Angel Broking on behalf of Angel Infin "clearly demonstrate beyond reasonable doubt that the noticees (Angel Broking and Angel Infin) knowingly engaged in execution of self trades and attempted to manipulate the price of scrip of the company (Sterling Green Woods)".

The regulator had said that both entities had violated PFUTP rules while Angel Broking had also "failed to carry out its business with due skill, care and due diligence in violation of Regulation... Of code of conduct for stock brokers".

The case related to a Sebi probe into share trading of Sterling Green Woods for the period from November 6, 2009 to December 2, 2009.
It was observed by SEBI that during the investigation period, the price of the scrip moved from Rs 19.80 to Rs 42.50 with an average daily volume of 69,776 shares.
As per the shareholding pattern of Sterling Green Woods, Angel Broking was holding more than one per cent shares in the company as on September 30, 2009 while Angel Infin was found to be executing self-trades.

The market regulator found that Angel Infin, while trading through Angel Broking, executed self trades four times.