Sebi disposes of case against H B Securities

Capital market regulator Sebi today dismissed charges of fraudulent trade practices and violations of stock broker norms against H B Securities in a case related to dealings in shares of VXL Instruments Ltd back in 2000-01
The show cause notice by Securities and Exchange Board of India (Sebi) had alleged H B Securities had executed a cross deal while trading for its connected client and also carried out structured trades in the scrip of VXL on behalf this client. The broker had also allegedly failed to undertake KYC (Know Your Client) formalities of clients.
In an order today, Sebi said noted that in order to prove the allegation of fraudulent or unfair trade practices "higher degree of preponderance of probability is required".

"I am of the view that preponderance of probability, in this case, is in favour of the noticee (H B Securities)," Sebi whole time member Rajeev Kumar Agarwal said.
"I, therefore, give the noticee the benefit of doubt with regard to the charge against it pursuant to its impugned transactions," he added.
Further Agarwal said: "As regards the allegation of not fulfilling KYC formalities properly, I find merit in the submissions of the noticee".

The order observed that the actions initiated against the connected clients of H B Securities with regard to the impugned trades have been discharged through the regulator's order dated September 24, 2010.

It also said that the 2010 order had clearly found that there was not sufficient proof to establish that the transactions were calculated to create false or misleading appearance of trading in the shares of VXL or were not intended to effect the transfer of beneficial ownership, among others.
Sebi had conducted an investigation into trading in the shares of VXL for the period from May 1999 to September 2000.
The probe found that entities belonging to two groups -- H B Group and CFL Group -- were among the major clients of various trading members and that their trading activity in the scrip of VXL contributed to 30 per cent of the net volume in the scrip.

This showed that H B Group including H B Securities played a major role in the increased trading activity in shares of VXL.