Capital market regulator Sebi has disposed of the case against stock broker H B Securities in a case related to fraudulent dealings in shares of tyre major Ceat Ltd, way back in 2000-01.
In its show cause notice, Securities and Exchange Board of India (Sebi) had alleged H B Securities of carrying out synchronised trades in the scrip of Ceat and indulged into circular trades on behalf of its clients who were related to each other and also to the stock broker.
While Sebi's enquiry officer had concluded that the broker had indulged in fraudulent dealings and violated norms for brokers, Sebi's whole time member Rajeev Kumar Agarwal in an order today ruled that "preponderance of probability, in this case, is in favour of the noticee (H B Securities)".
Accordingly Agarwal has given the broker "benefit of a doubt" and said that he did not "consider it necessary to take any action against it as contemplated in the SCN (Show Cause Notice)".
The order noted that the synchronised trades in the case needed "to be established on a high degree of probability".
"In this case, where the actions have been initiated against the connected clients of the noticee, they have been discharged vide order dated September 24, 2010 and no proceedings have been initiated against other parties to the transactions...," the order said.
Further, it also observed that there was not sufficient evidence to establish that the transactions were calculated to create false and misleading appearance of trading in Ceat share, among others.
Sebi had conducted a probe into trading and dealings in the shares of Ceat during the period from January 2000 to March 2000 and March 2001 to May 2001.
The regulator's enquiry officer had found that H B Securities had "executed those transactions on behalf of its related entities with fraudulent intentions and that quite a number of transactions were executed without intention of genuinely transferring beneficial ownership".
As per the details in the order, Sebi said it had not taken action against many of the counter-party clients while it had exonerated two clients on September 24, 2010, in the case.
