WTM/SR/EFD/DRA- 2 /116/06/2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM:S.RAMAN, WHOLE TIME MEMBER
ORDER
Under section 11, 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 in the
matter of Synchronized Trading by Connected Persons- in respect of Shri Bhavesh Kothari (PAN:
AABPK7614H) partner of Money Magnet Securities, Sub Broker (SEBI Reg No-INS013786723).
__________________________________________________________________________________
1. Securities and Exchange Board of India ("SEBI"), on the basis of certain alerts received on its
Integrated Market Surveillance System, conducted investigations into the synchronized / circular
trades, etc. alleged to have been executed in certain scrips on the BSE Limited ("BSE") by a group
of related/connected entities, to ascertain the possible violation of the provisions of the Securities
and Exchange of Board of India Act, 1992 (SEBI Act), the SEBI (Prohibition of Fraudulent and
Unfair Trade Practices Relating to securities Market) Regulations, 2003 (PFUTP Regulations),
the SEBI (Stock Brokers and Sub-brokers) Regulations, 1992, (Brokers Regulations) and the
SEBI (Intermediaries) Regulations, 2008 (Intermediaries Regulations), alleged to have been
committed by Money Magnet Securities ("Money Magnet") sub-broker affiliated to the stock
broker viz., India Capital Markets Private Limited and others during the period March 01, 2009 to
December 15, 2009 ("Investigation period")
2. The investigations, prima facie, revealed that a group of related/connected entities were involved in
carrying out irregular/manipulative activities in various scrips viz., Allcargo Global Logistics Limited
("Allacargo") , Asian Star Company Limited ("Asian"), KSL & Industries Limited ("KSL"),
Mavens Biotech Limited ("Mavens"), Panoramic Universal Limited ("Panaromic"), Rasi
Electrodes Limited ("Rasi"), Sat Industries Limited ("SIL") ,Ushdev International Limited
("Ushdev"), KBS Capital Management Limited ("KBS"), Lotus Eye care Hospitals Limited
("Lotus"), MVL Limited ("MVL") and Anil Products Limited ("APL").
3. The order/trade log analysis done in the respective scrips, prima facie, revealed that during the
investigation period, the said connected/related entities, in collusion with some of the market
intermediaries - including Money Magnet had traded/dealt in the shares of the aforesaid Companies
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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
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its submissions regarding cancellation of its SEBI registration)".

7. The Designated Authority, upon consideration of the allegations leveled against Money Magnet,
noted the following:
i.

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:

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No.

of

Gross

Structured
Trades
(buy
Scrip

Client

sell)

No. of Str

Trade

qty as % of

Str Buy

Sell

Quantity

Gross

Orders

Orders

(buy & sell)

Vol

Mkt

500

0.0185

Hasmukh Valchand Jain

1500

0.0555

Hitesh Mahendra Jain

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

Pawanben Valchand Jain

26

5422

0.2005

Reeta Naresh Rajawat

46

11

11

9880

0.3654

Shobha Dilip Kothari

902

0.0334

Sweta Bharat Kothari

12

3200

0.1184

208

62

59

47851

1.7697

1999

0.0304

Hitesh Mahendra Jain

22

3512

0.0534

Kamlesh P Jain

17

3200

0.0487

Kunal Dileep Kothari

16

4600

0.0700

1000

0.0152

Naresh V Rajawat

13

3200

0.0487

Neela Khicha

16

4900

0.0745

Pawanben Valchand Jain

35

10

6900

0.1050

1980

0.0301

Reeta Naresh Rajawat

14

3200

0.0487

Sweta Bharat Kothari

10

2598

0.0395

Vinay Kothari

15

5090

0.0774

176

50

42

42179

0.6417

5000

0.0652

Hasmukh Valchand Jain

Namita Khicha

Pradeep Kothari

Total
KSL

No. of

Total

Asian

Gr Str Trd

Anjana Mehta

Kunal Dileep Kothari

Allcargo

&

Structured

Hasmukh Valchand Jain

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Hitesh Mahendra Jain

13

5195

0.0678

Kunal Dileep Kothari

6993

0.0912

Namita Khicha

4000

0.0522

Naresh V Rajawat

7000

0.0913

Neela Khicha

10

6000

0.0783

Pawanben Valchand Jain

12

4000

0.0522

Pradeep Kothari

11

10980

0.1432

Reeta Naresh Rajawat

12

6000

0.0783

Sweta Bharat Kothari

4000

0.0522

Vinay Kothari

9000

0.1174

Total

99

25

20

68168

0.8891

Hasmukh Valchand Jain

10

4250

0.0252

6600

0.0391

19

10670

0.0633

Kunal Dileep Kothari

6600

0.0391

Naresh V Rajawat

2000

0.0119

Neela Khicha

4000

0.0237

Pawanben Valchand Jain

10

4500

0.0267

Reeta Naresh Rajawat

15

8680

0.0515

Shobha Dilip Kothari

1340

0.0079

Sweta Bharat Kothari

2000

0.0119

83

20

19

50640

0.3003

Anjana Mehta

600

0.0008

Anjana Mehta

19

6254

0.1158

Hitesh Mahendra Jain

23

12670

0.2347

Kamlesh P Jain

18

5666

0.1049

3975

0.0736

Neela Khicha

10

3330

0.0617

Pawanben Valchand Jain

19

10000

0.1852

Reeta Naresh Rajawat

38

20974

0.3885

Sweta Bharat Kothari

14

5960

0.1104

149

39

38

68829

1.2749

1000

0.1256

Hitesh Mahendra Jain

Kamlesh P Jain

Mavens

Total
MVL Total

Kunal Dileep Kothari

Panaromic

Total
Rasi

Hasmukh Valchand Jain

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SIL

Kamlesh P Jain

4000

0.5023

Kunal Dileep Kothari

2000

0.2511

Naresh V Rajawat

2000

0.2511

Pawanben Valchand Jain

1999

0.2510

Reeta Naresh Rajawat

12

4000

0.5023

Total

40

14999

1.8835

Anjana Mehta

13

6182

0.0907

Kunal Dileep Kothari

6000

0.0880

Pawanben Valchand Jain

4000

0.0587

Vinay Kothari

2000

0.0293

25

10

18182

0.2667

Hasmukh Valchand Jain

4801

0.0335

Hitesh Mahendra Jain

15000

0.1048

Kamlesh P Jain

6000

0.0419

Kunal Dileep Kothari

8700

0.0608

Namita Khicha

5000

0.0349

Naresh V Rajawat

4700

0.0328

Neela Khicha

7500

0.0524

Pawanben Valchand Jain

9000

0.0629

Reeta Naresh Rajawat

11

22000

0.1537

Sweta Bharat Kothari

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.

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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:
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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

violation of the regulatory framework of SEBI."

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
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violation, no further penalty is warranted in terms of the provisions of Regulation 28(1) of

Securities and Exchange Board of India (Intermediaries ) Regulation 2008.
15. I, therefore, in exercise of the powers conferred upon me by virtue of Section 19 of Securities and
Exchange Board of India Act, 1992 read with regulation 28(1) of Securities and Exchange Board of
India (Intermediaries) Regulation 2008, hereby dispose of the show cause notice issued to the
Noticee without further directions.

Place: Mumbai
Date: June 16, 2015

S. RAMAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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