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and they created artificial volumes in the said scrips by allegedly indulging into
synchronized/structured/circular trades etc. Allegedly, a number of connected entities had traded
in the abovementioned scrips through the trading terminal of Money Magnet. Further, it was also
observed during the investigations that the above said connected entities, while acting in collusion
with Money Magnet and other entities, were apparently interested in creating artificial volumes in
the aforesaid scrips and in the process the orders placed by them also influenced the price of those
scrips. It is alleged that the sub-broking activities of Money Magnet were controlled by Mr. Bhavesh
Kothari, the partner of Money Magnet who used to decide the scrip, price, quantity, etc. on behalf
of the said clients and this way a significant number of structured/synchronized trades were
executed through the trading terminal of Money Magnet.
4. Based on the above said observations of the investigations, it has been alleged that Money Magnet,
while acting in collusion with others, aided and abetted in manipulations, created artificial volumes
and also influenced price of various scrips and thereby violated/ contravened the provisions of
Regulations 4 (1), 4(2) (a), (b), (e) and (n) of the PFUTP Regulations and Clauses A(1), (2), B (7),
D(1), (4) and D(5) of the Code of Conduct for sub-brokers as prescribed in Schedule II of
Regulation 15 of the Brokers Regulations.
5. Pursuant to the investigations, SEBI initiated enquiry proceedings against Money Magnet under
regulation 24 of the Intermediaries Regulations, to enquire into the aforesaid violations alleged to
have been committed by it. The Designated Authority issued a Show Cause Notice dated March 12,
2012 to Money Magnet for the alleged violations.
6. In response to the said Show Cause Notice, Mr. Bhavesh Kothari, partner of the Noticee, vide
letter dated April 10, 2012 submitted as under:
"That in the matter earlier he had received a show cause notice dated February 08, 2012 in his individual
name and he has already replied to the same vide his letter dated March 01, 2012.
The instant proceedings against the Noticee are in the same matter and since he was individually managing
the firm, his reply in respect of the Notice shall also remain the same.
The registration of the Noticee has already been cancelled and its activities have been discontinued. The
name of the Noticee is neither appearing on the BSE website nor on the NSE website as a sub-broker of
India Capital Markets Pvt. Ltd. (The Noticee enclosed a few of the documents in support of
Page 2 of 9
The SEBI investigations, prima facie, revealed that a group of persons viz., Jitendra Jain,
Usha Mehta, Sunil Kumar Mehta, Anjana Mehta , Renu Madhusudhan Paliwal, Rashmi R
Gandhi, Ramesh Gandhi, Hemlata Ramesh Hankare, Manish Mathur, Seema Mathur, Ajay
Roongta, Bharat Jain, Suresh Hanswal, Hasmukh Valchand Jain, Naresh V Rajawat,
Pawanben Valchand Jain, Reeta Naresh Rajawat, Kunal Dileep Kothari, Sweta Bharat
Kothari, Neela Khicha, Shobha Dilip Kothari, Kamlesh P Jain, Hitesh Mahendra Jain,
Bhavesh Kothari, Namita Khischa, Vinay Kothari, Pradeep Kothari, Sitanshu Nanawati,
Devendra Kumar Rai, Rakesh H Jain, Bhavesh Jain, Meena Rajawat, Shaikh Soalli
Jainuddin, Alpesh R Shah, Anil Rajmal Shah, Praveen Gate are related /connected/linked
to each other and they together form a group (hereinafter collectively referred to as
"Mehta Group).
ii.
The scrips in which the said Mehta Group entities alleged to have traded and taken for the
said investigation were Allcargo ,Asian, KSL , Mavens, Panaromic, Rasi, SIL, Ushdev,
KBS, Lotus, MVL and APL during the period July 01, 2009 to December 15, 2009.
iii.
The order/trade log analysis done in the respective scrips, prima facie, revealed that during
the investigation period, the Mehta Group entities, in collusion with some of the market
intermediaries - including Money Magnet had traded/dealt in the shares of the aforesaid
Companies and they created artificial volumes in the said scrips by allegedly indulging in
synchronized/structured/circular trades etc.
iv.
The SEBI investigations have prima facie, revealed that the following clients had traded in
the abovesaid scrips through the trading terminal of Money Magnet. The relevant details in
this regard are placed below:
Page 3 of 9
No.
of
Gross
Structured
Trades
(buy
Scrip
Client
sell)
No. of Str
Trade
qty as % of
Str Buy
Sell
Quantity
Gross
Orders
Orders
Vol
Mkt
500
0.0185
1500
0.0555
56
18
21
12000
0.4438
Kamlesh P Jain
22
5247
0.1941
2600
0.0962
Naresh V Rajawat
11
3600
0.1331
Neela Khicha
12
3000
0.1110
26
5422
0.2005
46
11
11
9880
0.3654
902
0.0334
12
3200
0.1184
208
62
59
47851
1.7697
1999
0.0304
22
3512
0.0534
Kamlesh P Jain
17
3200
0.0487
16
4600
0.0700
1000
0.0152
Naresh V Rajawat
13
3200
0.0487
Neela Khicha
16
4900
0.0745
35
10
6900
0.1050
1980
0.0301
14
3200
0.0487
10
2598
0.0395
Vinay Kothari
15
5090
0.0774
176
50
42
42179
0.6417
5000
0.0652
Namita Khicha
Pradeep Kothari
Total
KSL
No. of
Total
Asian
Gr Str Trd
Anjana Mehta
&
Structured
Page 4 of 9
13
5195
0.0678
6993
0.0912
Namita Khicha
4000
0.0522
Naresh V Rajawat
7000
0.0913
Neela Khicha
10
6000
0.0783
12
4000
0.0522
Pradeep Kothari
11
10980
0.1432
12
6000
0.0783
4000
0.0522
Vinay Kothari
9000
0.1174
Total
99
25
20
68168
0.8891
10
4250
0.0252
6600
0.0391
19
10670
0.0633
6600
0.0391
Naresh V Rajawat
2000
0.0119
Neela Khicha
4000
0.0237
10
4500
0.0267
15
8680
0.0515
1340
0.0079
2000
0.0119
83
20
19
50640
0.3003
Anjana Mehta
600
0.0008
Anjana Mehta
19
6254
0.1158
23
12670
0.2347
Kamlesh P Jain
18
5666
0.1049
3975
0.0736
Neela Khicha
10
3330
0.0617
19
10000
0.1852
38
20974
0.3885
14
5960
0.1104
149
39
38
68829
1.2749
1000
0.1256
Mavens
Total
MVL Total
Total
Rasi
Page 5 of 9
SIL
Kamlesh P Jain
4000
0.5023
2000
0.2511
Naresh V Rajawat
2000
0.2511
1999
0.2510
12
4000
0.5023
Total
40
14999
1.8835
Anjana Mehta
13
6182
0.0907
6000
0.0880
4000
0.0587
Vinay Kothari
2000
0.0293
25
10
18182
0.2667
4801
0.0335
15000
0.1048
Kamlesh P Jain
6000
0.0419
8700
0.0608
Namita Khicha
5000
0.0349
Naresh V Rajawat
4700
0.0328
Neela Khicha
7500
0.0524
9000
0.0629
11
22000
0.1537
4000
0.0279
Vinay Kothari
10000
0.0699
52
23
96701
0.6756
Total
Ushdev
Total
v.
It was observed that Mr. Bhavesh Kothari controlled the activities of Money Magnet. He
used to decide the scrip, price, quantity etc. on behalf of the said clients and in this manner
a significant number of structured/synchronized trades were executed through Money
Magnet's trading terminal. Soft copy of the relevant order/trade log details in respect of
the said observations regarding execution of structured/synchronized trades were provided
to Money Magnet in a CD/DVD attached to the Show Cause Notice dated March 12,
2012. The relevant details of the alleged manipulations in the said scrips and also the
individual role of Bhavesh Kothari in the said manipulations, in collusion with others, were
provided to Money Magnet in Annexure II to V to the said Show Cause Notice.
Page 6 of 9
vi.
DA had noted that Mr. Bhavesh Kothari had replied to the SCN vide letter dated April 10,
2012 in the capacity of partner of Money Magnet. DA had stated in the Report that Mr.
Bhavesh Kothari had admitted the aforesaid violations and stated those to be unintentional
mistake on his part, which he allegedly committed under influence of one Mr. Sunil Mehta.
8. In view of the said admission of the violations referred to in the SCN by Money Magnet, DA
concluded that Money Magnet violated/contravened the aforesaid provisions of the PFUTP
Regulations and the Brokers Regulations. For such violations, the suitable action in terms of
regulation 27 of the SEBI Intermediaries Regulations include recommendation for suspension of
certificate of registration for a specified period. However, it is noted from the submissions of
Money Magnet that its certificate of registration as a sub-broker had already been cancelled.
Further, its name is neither appearing on the BSE website nor on the NSE website as a sub-broker
of India Capital Markets Pvt. Ltd. Money Magnet also furnished documents in support of its
contention.
9.
It is noted that certificate of registration granted to Money Magnet was surrendered and the SEBI
Registration of Money Magnet as a sub-broker of India Capital Markets Pvt. Ltd. ended with effect
from August 10, 2011.
10. Thus, it is evident from the said details that during the period May 18, 2007 o August 10, 2011
Money Magnet was registered with SEBI as a sub-broker. The aforesaid violation of the PFUTP
Regulations and the Brokers Regulations were committed by it, while acting as a SEBI registered
intermediary. Hence, such violation warrants a suitable action in terms of regulation 27 of the SEBI
Intermediaries Regulation such as recommendation for suspension of certificate of registration for a
specified period. However, the said recommendations would now become redundant as the
certificate of registration of the Noticee has already been cancelled with effect from August 10,
2011. The DA had noted that Bhavesh Kothari (partner of the Sub broking firm) was the main
person of the Noticee who was managing its day-to-day affairs and operations. Admittedly, he was
the person responsible for the aforesaid manipulative acts of the Noticee.
11. In view of the above facts and circumstances, DA vide Report dated April 25, 2012 recommended
in terms of regulation 27(iv)of the Intermediaries Regulations that "Bhavesh Kothari (PAN:
Page 7 of 9
AABPK7614H) who was partner of the Money Magnet Securities (i.e. the Noticee) during the period when the
aforesaid violations were committed by the Noticee, be debarred from being employed or associated with any registered
intermediary or other registered person for a period of three years".
12. Thereafter, a show cause notice ("SCN") dated May 10, 2012 was issued along with a copy of
enquiry report to Mr. Bhavesh Kothari (hereinafter referred to as "the Noticee"), partner of
Money Magnet, under Regulation 28(1) of SEBI (Intermediaries) Regulation, 2008 calling upon
him to show cause as why the penalty as recommended by the DA or any other higher penalty as
deemed fit should not be imposed upon him. The Noticee, vide letter dated May 29, 2012 inter alia
stated that he should not be debarred from being employed with or associated with any registered
intermediary of other registered persons, for the reasons stated below:
(i)"I have been debarred from trading in securities market vide SEBI Order No.
WTM/KMA/IVD/385/05/2011 dated May 27, 2011 wherein the action has been taken for the
same allegations mentioned in the investigation report attached with the current show cause notice.
(ii) I have been associated with securities market since last 6 years and I am not in a position to restart
a new line of activity taking into account my current age of 32 years,
(iii) I have a family which is dependent on my income which can come only if I am employed and such
order will result in not just hardships to me and my family, but will make me handicapped to provide
them basic necessities food, clothing and education.
(iv) I assure you that I will not be taking up any activity as mentioned in the investigation report,
in
13. It is however, noted that the Noticee had not denied the alleged violations. The Noticee was
granted an opportunity of personal hearing on March 19, 2014. During the personal hearing the
Noticee had accepted the violations and requested for lenient view considering his life condition.
14. The Noticee has been debarred from dealing in the Securities Market vide order dated September 6,
2013 for a period of five years and the said period has been in operation since the date of the
interim order i.e. May 27, 2011. I further note that the period of restraint imposed vide final order
dated September 06, 2013 is in force till May 26, 2016. Considering the same I am of the view that
as the Noticee has been prohibited from dealing in securities for a period of five years for the same
Page 8 of 9
Place: Mumbai
Date: June 16, 2015
S. RAMAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
Page 9 of 9