Cholamandalam Securities Ltd. Vs. Securities and Exchange Board of India - Court Judgment

Excerpt:
1. the appeal is taken up for final disposal with the consent of both the parties.2. the appeal is against the order of the respondent, sebi, passed on 27/01/2005, the operative portion of which reads as under: "in view of the above, i in exercise of powers conferred upon me under section 4(3) of sebi, act, 1992 read with sebi (stock broker and sub-broker) regulations, 1992 and regulation 13(4) of sebi (procedure for holding enquiry by enquiry officer and imposing penalty) regulations, 2002 direct that certification of registration bearing sebi registration no. inb 0230759932 be suspended for a period of two months." 3. the tribunal vide its order dated 14/02/2005 on finding the balance convenience would be to stay the impugned order pending appeal, granted interim order by staying the impugned order pending appeal. 5. sebi had conducted an investigation into the dealings in the scrip of moschip semiconductors limited ('moschip' for short) for the period 7/05/2001 to 31/05/2001 when there was an initial rise in the price of the scrip during the above mentioned period. it was found from the investigation that cholamandalam securities limited, the appellant, had bought 12,625 shares and sold 1,000 shares on behalf of mr. b. jayaprakash over a period of 3-4 days in may and june, 2001.6. on the basis of the investigation report sebi conducted an enquiry under regulation 4(a) of sebi (procedure for holding enquiry by enquiry officer and imposing penalty) regulations, 2002 vide its order dated 24/09/2003 who enquired into the alleged violations committed by the appellant, who is a member of stock exchange, mumbai in respect of their dealing in moschip. the enquiry officer in his findings stated: "(a) cholamandalam accepted cheques issued by m/s. vijay growth financial services ltd., for purchase of shares by mr. b. jayaprakash; "(b) cholamandalam accepted mr. b. jayaprakash as a client without proper verification about his employer; "(c) cholamandalam executed orders on behalf of shri jayaprakash for rs. 6.19 lakhs in the scrip of moschip whereas his annual income was rs. 3 lakhs only".7. a show cause notice dated 07/04/2004 along with the enquiry report was issued to the appellant, asking them to furnish their reply within 15 days time. the appellant submitted its reply dated 24/04/2004 to sebi refuting the charges under the show cause notice. the reply also mentioned that the appellant was a part of respected murugappa group in the south which was known for high level of ethics and moral values.they also submitted that clause no. a(2) of conduct of conduct specified in schedule ii of sebi (stock brokers and sub-brokers) regulations, 1992 was not violated by them and they always exercised due skill, care and diligence in the conduct of their business.8. an opportunity of personal hearing was granted by sebi to the appellant on october 12, 2004. subsequently vide their letter dated 15/10/2004, written submissions were also made by the appellant. it was submitted by them that they had no reason to doubt the bonafides of mr.jayaprakash since he was introduced by mr. ramesh, vice president of andhra pradesh industrial corporation venture capital limited, an institutional client. it was also submitted that sebi circular prohibiting acceptance of third party cheques on behalf of clients by the brokers came into effect only in august, 2003 whereas they had accepted third party cheques on behalf of mr. jayaprakash in june, 2001, and therefore, the retrospective effect could not be given to the said circular. they also cited instances where sebi had passed orders by issuing simple warning letters to such brokers even when the nature of violations in their cases were more grave as compared to the alleged violations by the appellant. the appellant also cited the orders passed by the tribunal such as in appeal no. 53 of 2003, samkit share and stock brokers pvt. ltd. v. sebi dated 31/08/2004; chona financial services pvt. ltd. v. sebi, appeal no. 95 of 2003 dated 23/08/2004 wherein the tribunal had reduced the penalty from suspension to warning. it was also submitted by the appellant that the mitigating factors may be considered while taking a view in the matter: (j) no action taken by any regulatory body including sebi and nse till date. (k) no funding or financing done by them for alleged manipulation by mr. jayaprakash. (m) the transactions done by mr. jayaprakash through them constituted only 0.01% of the total turnover of the company that year.9. while passing the order dated 27/01/2005, the chairman, sebi took note of the finding of investigation report, show cause notice, the finding of enquiry report, reply and written submissions submitted by the appellant. it was mentioned in the impugned order that the price of moschip had increased from rs. 25.80 on may 7, 2001 to rs. 50.85 on may 31, 2001. it was pointed out in the order that m/s. vijay growth financial services (for short 'vgfl') through jayaprakash were found to be trading substantially in moschip. it was also found that b.jayaprakash, who was an employee of vgfl and vgfl itself were common clients of techno shares and stock brokers limited, a member of bse. it was found from investigations that transactions by these entities had resulted in establishment of higher price level for scrip of moschip from rs. 25.80 to rs. 50/- during the said period in may, 2001. it was mentioned in the impugned order that mr. jayaprakash bought 31,639 shares of moschip during the said period. he bought 12,385 shares of moschip through the appellant and 19,254 through paark securities and vgfl paid rs. 6.75 lakhs for shares of moschip bought by mr.jayaprakash through the appellant vide three cheques no. 213634 dated 29/05/2001 for rs. 2.25 lakhs, no. 216362 dated 07/06/2001 for rs. 4 lakhs and no. 213672 dated 09/06/2001 for rs. 50,000/-.10. as per the statement of mr. d.b. reddy, director of vgfl, the appellant approached vgfl for trading in securities. shri jayaprakash who was an employee of vgfl and who was also handling securities on behalf of vgfl, purchased securities in his name and the appellant started dealing with him. it was mentioned by mr. reddy that jayaprakash had bought these shares in his own name and the payments were made by vgfl for about rs. 8,95,000/- for these transactions. mr.reddy, director of vgfl, also agreed in this statement that it was an irregular transaction and requested that it could be treated as a procedural lapse. the above findings were corroborated even by mr. r.pandiyan, senior manager of the appellant, in his statement dated 18/12/2002 recorded before the enquiry officials of sebi. he said that: "in view of the huge outstandings we have taken these cheques initially and as a matter of business prudence we have refused to accept third party cheques for future transactions." 11. it has been mentioned in the impugned order that the appellant accepted cheques issued by vgfl for the payment that mr. jayaprakash had to make for his purchases of the scrip. it is also mentioned in the impugned order that the appellant was the one who approached vgfl for trading in the scrip and this fact has not been denied by the appellant anywhere in the proceedings. in the impugned order it was mentioned that the appellant while conducting his business has not exercised due caution, care and diligence. shri jayaprakash who was a client of the appellant from may, 2001 had only an annual income of rs. 3 lakhs in the client registration form but he was allowed to trade in the scrip of moschip to the tune of rs. 6.75 lakhs in a single month. the impugned order further mentioned that a broker was an important intermediary in the capital market who had an obligation to carry out the business in such a manner that safety and integrity of the market could be maintained. it was not the charge that the appellant had violated any of the sebi circular, but the conduct expected from it as a registered intermediary was not being delivered. in view of the above, it is mentioned in the impugned order that the appellant thus violated clause a(2) of schedule ii of sebi (stock broker and sub-broker) regulations, 1992.12. the learned senior counsel for the appellant submitted that the impugned order deserved to be set aside in view of the fact that by accepting three cheques from third parties in may/june, 2001 there was no violation by the appellant of the laws or circulars of the respondent. sebi circular prohibiting the acceptance of third party cheque is of august, 2003 whereas these transactions took place in the month of may/june, 2001.13. the impugned order mentioned that mr. jayaprakash was accepted as a client without proper verification about his employer. the learned senior counsel for the appellant submitted that the client registration form as prescribed by sebi was correctly filled in by mr. jayaprakash for column for occupation has been mentioned as 'service' and the client registration form does not require the details of the employer to be filled in by the client. the client registration form as prescribed by sebi was fully complied with. the appellant had obtained the details of the occupation of the client which was indicated by "service". moreover the form contains a declaration by the client stating that the information given therein was true to the best of his knowledge and belief.14. it is mentioned in the impugned order that the orders were executed on behalf of mr. jayaprakash by the appellant for rs. 6.19 lakhs in the scrip of moschip whereas his annual income as mentioned in the client registration form was rs. 3 lakhs only. the learned senior counsel pointed out that this finding was not included in the enquiry report on the basis of investigating officer's report. the investigating officer had not come to this finding from his investigations whereas this point was included in the enquiry report and also in the impugned order. he argued, without prejudice to his contention, that regulations or rules framed by sebi did not stipulate that a broker should not execute orders from a client for value which was more than the annual income or the credit worthiness of the client. in the absence of such a specific requirement the enquiry officer had no authority to hold it as an alleged violation of non-existent regulatory provision. he went on to argue that the client registration form was basically a self declaration. it was operationally not possible to check each and every transaction of a large number of clients about the annual income declared in the client registration form. moreover, in this case the client had been introduced by an institutional client apidc venture capital. he also argued that the income was not static, it could vary over a period of time and there may be various sources of income. he further argued that mr. jayaprakash did not default in the transactions entered through the appellant. finally he submitted that the appellant was a part of well reputed financial group of south and its record had been impeccable so far and it would damage its reputation if such an order was passed against it. he therefore submitted hat the impugned order should be set aside.15. the learned counsel for the respondent argued that the impugned order had been passed after conducting an investigation and also an enquiry by the enquiry officer. the appellant was given full opportunity to place his view point. he argued that it was agreed by all that there was an initial price rise in the scrip of moschip during 7/05/2001 to 31/07/2001 when two entities m/s. vgfl and mr. b.jayaprakash were found to have traded substantially in the scrip of moschip. he also pointed out that m/s. cholamandalam securities accepted cheques issued by vgfl for payment against shares bought by mr. jayaprakash . the appellant accepted orders on behalf of jayaprakash for rs. 6.19 lakhs shares of moschip whereas his annual income was rs. 3 lakhs. since jayaprakash and vgfl were involved in the initial price rise in the scrip of moschip, it was essential that the appellant should have exercised prudence and care in allowing jayaprakash to trade heavily in the scrip. it was therefore clear that the appellant had failed to exercise due diligence, care and skill and thereby violated clause a(2) of the code of conduct specified in schedule ii of sebi (brokers and sub-brokers) regulations, 1992.16. we have perused the impugned order, documents submitted before us, the enquiry report, the grounds of appeal by the appellant and the submissions made by both the counsels. having heard the submissions of both the parties we find that in the impugned order only a minor penalty has been imposed. both, the recommendation by the enquiry officer and also in the impugned order only a minor penalty of two months suspension has been imposed. the learned senior counsel for the appellant relied on a number of pronouncements of sebi as well as by the tribunal where, in similar circumstances, a stock broker has been absolved of the alleged misconduct, including the judgment in chona financial services pvt. ltd., in appeal no. 95 of 2003. in the case of chona financial services pvt. ltd., the tribunal has extracted the orders rendered by sebi and sat and the nature of penalty which are extracted below: "the appellant submitted a few cases namely m/s. bakliwala investment, j.m. morgan stanley retail services pvt. ltd., bama securities as under, which have been found to contain by and large similar irregularities and have been only served with a letter of warning by sebi. provision for tax for the interim period from april 1 to september 30, 2000 not made confirmations have not been obtained from banks, creditors and debtors by the broker. contract notes not serially numbered except for computer generated numbers on day-to-day basis which have no control. one client account being adjusted against another client without any authorization transactions with associate firms/companies separate set of ledger accounts as clients and others not maintained. irregularities are basically technical lapses and do not deserve a substantive punishment. reliance has been placed on a few other judgments as under in which similar irregularities were found and were served with a letter of warning. non-segregation of clients accounts with own account and for not reporting off-the-floor transactions to stock exchange non-segregation of clients accounts with own account and for not reporting off-the floor transactions to stock exchange loan against shares of holding company and loan transaction in clients account. dealing with broker of other stock exchange without getting registered as a sub-2broker non-segregation of clients account with own account, misuse of client's fund delay on delivery of securities and not reporting off the floor transactions 17. however, this is a case where the appellant ought to have made due verification with regard to the client jayaprakash, whose only income admittedly known to the appellant was only rs. 3 lakhs and that jayaprakash who was trading in a scrip which was under investigation.the appellant ought to have been diligent and careful. therefore, having regard to the facts and circumstances of this case, the order of the respondent is modified to that of mere warning to enable the appellant to be more vigilant in future.18. taking into account the good track record of the appellant and the appellant's reputation in the securities market as a broker it is our desire that this order should not be treated as a stigma to impede growth of the appellant.

Judgment:
1. The appeal is taken up for final disposal with the consent of both the parties.

2. The appeal is against the order of the respondent, SEBI, passed on 27/01/2005, the operative portion of which reads as under: "In view of the above, I in exercise of powers conferred upon me under Section 4(3) of SEBI, Act, 1992 read with SEBI (Stock Broker and Sub-broker) Regulations, 1992 and Regulation 13(4) of SEBI (Procedure For Holding Enquiry By Enquiry Officer And Imposing Penalty) Regulations, 2002 direct that certification of registration bearing SEBI Registration no. INB 0230759932 be suspended for a period of two months." 3. The Tribunal vide its order dated 14/02/2005 on finding the balance convenience would be to stay the impugned order pending appeal, granted interim order by staying the impugned order pending appeal.

5. SEBI had conducted an investigation into the dealings in the scrip of Moschip Semiconductors Limited ('Moschip' for short) for the period 7/05/2001 to 31/05/2001 when there was an initial rise in the price of the scrip during the above mentioned period. It was found from the investigation that Cholamandalam Securities Limited, the appellant, had bought 12,625 shares and sold 1,000 shares on behalf of Mr. B. Jayaprakash over a period of 3-4 days in May and June, 2001.

6. On the basis of the investigation report SEBI conducted an enquiry under Regulation 4(a) of SEBI (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 vide its order dated 24/09/2003 who enquired into the alleged violations committed by the appellant, who is a member of Stock Exchange, Mumbai in respect of their dealing in Moschip. The Enquiry Officer in his findings stated: "(a) Cholamandalam accepted cheques issued by M/s. Vijay Growth Financial Services Ltd., for purchase of shares by Mr. B. Jayaprakash; "(b) Cholamandalam accepted Mr. B. Jayaprakash as a client without proper verification about his employer; "(c) Cholamandalam executed orders on behalf of Shri Jayaprakash for Rs. 6.19 lakhs in the scrip of Moschip whereas his annual income was Rs. 3 lakhs only".

7. A show cause notice dated 07/04/2004 along with the enquiry report was issued to the appellant, asking them to furnish their reply within 15 days time. The appellant submitted its reply dated 24/04/2004 to SEBI refuting the charges under the show cause notice. The reply also mentioned that the appellant was a part of respected Murugappa Group in the South which was known for high level of ethics and moral values.

They also submitted that Clause No. A(2) of Conduct of Conduct specified in Schedule II of SEBI (Stock Brokers and Sub-brokers) Regulations, 1992 was not violated by them and they always exercised due skill, care and diligence in the conduct of their business.

8. An opportunity of personal hearing was granted by SEBI to the appellant on October 12, 2004. Subsequently vide their letter dated 15/10/2004, written submissions were also made by the appellant. It was submitted by them that they had no reason to doubt the bonafides of Mr.

Jayaprakash since he was introduced by Mr. Ramesh, Vice President of Andhra Pradesh Industrial Corporation Venture Capital Limited, an institutional client. It was also submitted that SEBI circular prohibiting acceptance of third party cheques on behalf of clients by the brokers came into effect only in August, 2003 whereas they had accepted third party cheques on behalf of Mr. Jayaprakash in June, 2001, and therefore, the retrospective effect could not be given to the said circular. They also cited instances where SEBI had passed orders by issuing simple warning letters to such brokers even when the nature of violations in their cases were more grave as compared to the alleged violations by the appellant. The appellant also cited the orders passed by the Tribunal such as in appeal No. 53 of 2003, Samkit Share and Stock Brokers Pvt. Ltd. v. SEBI dated 31/08/2004; Chona Financial Services Pvt. Ltd. v. SEBI, appeal No. 95 of 2003 dated 23/08/2004 wherein the Tribunal had reduced the penalty from suspension to warning. It was also submitted by the appellant that the mitigating factors may be considered while taking a view in the matter: (j) No action taken by any regulatory body including SEBI and NSE till date.

(k) No funding or financing done by them for alleged manipulation by Mr. Jayaprakash.

(m) The transactions done by Mr. Jayaprakash through them constituted only 0.01% of the total turnover of the company that year.

9. While passing the order dated 27/01/2005, the Chairman, SEBI took note of the finding of investigation report, show cause notice, the finding of enquiry report, reply and written submissions submitted by the appellant. It was mentioned in the impugned order that the price of Moschip had increased from Rs. 25.80 on May 7, 2001 to Rs. 50.85 on May 31, 2001. It was pointed out in the order that M/s. Vijay Growth Financial Services (for short 'VGFL') through Jayaprakash were found to be trading substantially in Moschip. It was also found that B.Jayaprakash, who was an employee of VGFL and VGFL itself were common clients of Techno Shares and Stock Brokers Limited, a member of BSE. It was found from investigations that transactions by these entities had resulted in establishment of higher price level for scrip of Moschip from Rs. 25.80 to Rs. 50/- during the said period in May, 2001. It was mentioned in the impugned order that Mr. Jayaprakash bought 31,639 shares of Moschip during the said period. He bought 12,385 shares of Moschip through the appellant and 19,254 through Paark Securities and VGFL paid Rs. 6.75 lakhs for shares of Moschip bought by Mr.

Jayaprakash through the appellant vide three cheques No. 213634 dated 29/05/2001 for Rs. 2.25 lakhs, No. 216362 dated 07/06/2001 for Rs. 4 lakhs and No. 213672 dated 09/06/2001 for Rs. 50,000/-.

10. As per the statement of Mr. D.B. Reddy, Director of VGFL, the appellant approached VGFL for trading in securities. Shri Jayaprakash who was an employee of VGFL and who was also handling securities on behalf of VGFL, purchased securities in his name and the appellant started dealing with him. It was mentioned by Mr. Reddy that Jayaprakash had bought these shares in his own name and the payments were made by VGFL for about Rs. 8,95,000/- for these transactions. Mr.

Reddy, Director of VGFL, also agreed in this statement that it was an irregular transaction and requested that it could be treated as a procedural lapse. The above findings were corroborated even by Mr. R.Pandiyan, Senior Manager of the appellant, in his statement dated 18/12/2002 recorded before the Enquiry Officials of SEBI. He said that: "In view of the huge outstandings we have taken these cheques initially and as a matter of business prudence we have refused to accept third party cheques for future transactions." 11. It has been mentioned in the impugned order that the appellant accepted cheques issued by VGFL for the payment that Mr. Jayaprakash had to make for his purchases of the scrip. It is also mentioned in the impugned order that the appellant was the one who approached VGFL for trading in the scrip and this fact has not been denied by the appellant anywhere in the proceedings. In the impugned order it was mentioned that the appellant while conducting his business has not exercised due caution, care and diligence. Shri Jayaprakash who was a client of the appellant from May, 2001 had only an annual income of Rs. 3 lakhs in the client registration form but he was allowed to trade in the scrip of Moschip to the tune of Rs. 6.75 lakhs in a single month. The impugned order further mentioned that a broker was an important intermediary in the capital market who had an obligation to carry out the business in such a manner that safety and integrity of the market could be maintained. It was not the charge that the appellant had violated any of the SEBI circular, but the conduct expected from it as a registered intermediary was not being delivered. In view of the above, it is mentioned in the impugned order that the appellant thus violated Clause A(2) of Schedule II of SEBI (Stock Broker and Sub-Broker) Regulations, 1992.

12. The learned Senior Counsel for the appellant submitted that the impugned order deserved to be set aside in view of the fact that by accepting three cheques from third parties in May/June, 2001 there was no violation by the appellant of the laws or circulars of the respondent. SEBI circular prohibiting the acceptance of third party cheque is of August, 2003 whereas these transactions took place in the month of May/June, 2001.

13. The impugned order mentioned that Mr. Jayaprakash was accepted as a client without proper verification about his employer. The learned senior counsel for the appellant submitted that the client registration form as prescribed by SEBI was correctly filled in by Mr. Jayaprakash for column for occupation has been mentioned as 'service' and the client registration form does not require the details of the employer to be filled in by the client. The client registration form as prescribed by SEBI was fully complied with. The appellant had obtained the details of the occupation of the client which was indicated by "service". Moreover the form contains a declaration by the client stating that the information given therein was true to the best of his knowledge and belief.

14. It is mentioned in the impugned order that the orders were executed on behalf of Mr. Jayaprakash by the appellant for Rs. 6.19 lakhs in the scrip of Moschip whereas his annual income as mentioned in the Client Registration Form was Rs. 3 lakhs only. The learned Senior Counsel pointed out that this finding was not included in the enquiry report on the basis of investigating officer's report. The Investigating Officer had not come to this finding from his investigations whereas this point was included in the enquiry report and also in the impugned order. He argued, without prejudice to his contention, that Regulations or Rules framed by SEBI did not stipulate that a broker should not execute orders from a client for value which was more than the annual income or the credit worthiness of the client. In the absence of such a specific requirement the Enquiry Officer had no authority to hold it as an alleged violation of non-existent regulatory provision. He went on to argue that the client registration form was basically a self declaration. It was operationally not possible to check each and every transaction of a large number of clients about the annual income declared in the client registration form. Moreover, in this case the client had been introduced by an institutional client APIDC Venture Capital. He also argued that the income was not static, it could vary over a period of time and there may be various sources of income. He further argued that Mr. Jayaprakash did not default in the transactions entered through the appellant. Finally he submitted that the appellant was a part of well reputed financial group of South and its record had been impeccable so far and it would damage its reputation if such an order was passed against it. He therefore submitted hat the impugned order should be set aside.

15. The learned counsel for the respondent argued that the impugned order had been passed after conducting an investigation and also an enquiry by the Enquiry Officer. The appellant was given full opportunity to place his view point. He argued that it was agreed by all that there was an initial price rise in the scrip of Moschip during 7/05/2001 to 31/07/2001 when two entities M/s. VGFL and Mr. B.Jayaprakash were found to have traded substantially in the scrip of Moschip. He also pointed out that M/s. Cholamandalam Securities accepted cheques issued by VGFL for payment against shares bought by Mr. Jayaprakash . The appellant accepted orders on behalf of Jayaprakash for Rs. 6.19 lakhs shares of Moschip whereas his annual income was Rs. 3 lakhs. Since Jayaprakash and VGFL were involved in the initial price rise in the scrip of Moschip, it was essential that the appellant should have exercised prudence and care in allowing Jayaprakash to trade heavily in the scrip. It was therefore clear that the appellant had failed to exercise due diligence, care and skill and thereby violated Clause A(2) of the Code of Conduct specified in Schedule II of SEBI (Brokers and Sub-Brokers) Regulations, 1992.

16. We have perused the impugned order, documents submitted before us, the enquiry report, the grounds of appeal by the appellant and the submissions made by both the counsels. Having heard the submissions of both the parties we find that in the impugned order only a minor penalty has been imposed. Both, the recommendation by the enquiry officer and also in the impugned order only a minor penalty of two months suspension has been imposed. The learned senior counsel for the appellant relied on a number of pronouncements of SEBI as well as by the Tribunal where, in similar circumstances, a stock broker has been absolved of the alleged misconduct, including the judgment in Chona Financial Services Pvt. Ltd., in appeal No. 95 of 2003. In the case of Chona Financial Services Pvt. Ltd., the Tribunal has extracted the orders rendered by SEBI and SAT and the nature of penalty which are extracted below: "The appellant submitted a few cases namely M/s. Bakliwala Investment, J.M. Morgan Stanley Retail Services Pvt. Ltd., Bama Securities as under, which have been found to contain by and large similar irregularities and have been only served with a letter of warning by SEBI. Provision for Tax for the interim period from April 1 to September 30, 2000 not made Confirmations have not been obtained from Banks, Creditors and debtors by the broker.

Contract notes not serially numbered except for computer generated numbers on day-to-day basis which have no control.

One client account being adjusted against another client without any authorization Transactions with associate firms/companies separate set of ledger accounts as clients and others not maintained.

Irregularities are basically technical lapses and do not deserve a substantive punishment.

Reliance has been placed on a few other judgments as under in which similar irregularities were found and were served with a letter of warning.

Non-segregation of clients accounts with own account and for not reporting off-the-floor transactions to Stock Exchange Non-segregation of clients accounts with own account and for not reporting off-the floor transactions to Stock Exchange Loan against shares of holding company and loan transaction in clients account.

Dealing with broker of other Stock exchange without getting registered as a sub-2broker Non-segregation of clients account with own account, misuse of client's fund Delay on delivery of securities and not reporting off the floor transactions 17. However, this is a case where the appellant ought to have made due verification with regard to the client Jayaprakash, whose only income admittedly known to the appellant was only Rs. 3 lakhs and that Jayaprakash who was trading in a scrip which was under investigation.

The appellant ought to have been diligent and careful. Therefore, having regard to the facts and circumstances of this case, the order of the respondent is modified to that of mere warning to enable the appellant to be more vigilant in future.

18. Taking into account the good track record of the appellant and the appellant's reputation in the securities market as a broker it is our desire that this order should not be treated as a stigma to impede growth of the appellant.