SEBI Imposes Rs 6 Lakh Fine on Advent Stock Broking for Indulging in Unfair Trade Practices

SEBI orders Imposition of Rs 6 Lakh Fine on Advent Stock Broking Pvt Ltd. for Indulging in Unfair Trade Practices

Security Exchange Board of India imposed a total fine of Rs 6 lakh on Advent Stock Broking Pvt Ltd. The order was passed by an Adjudicating Officer in exercise of powers conferred to him as per Section 151(2) of the SEBI Act and read with Rule 5 of the Adjudication Rules.

The Advent Stock Broking Pvt Ltd (Noticee) was penalised for not adhering to the code of conduct prescribed for a stock broker and other market norm while using National Securities Exchange (NSE) co-location facility.

SEBI had received multiple complaints pertaining to allegations of malpractices with respect to the co-location facility being provided by the National Stock Exchange of India Ltd. In the wake of allegations of preferential access to Tick-by-Tick (TBT) data feed given by NSE to certain trading members (TMs), the matter was taken up for investigation by SEBI.

It was alleged that Notice being an intermediary had failed to comply with operational guidelines and instructions issued by NSE and thereby failed to exercise due skill, care and diligence. Therefore, Notice was alleged to be in violation of Point 2(a) of Chapter V of NSE bye-laws read with Clause A(5) of the Code of Conduct specified under Schedule II read with regulation 9(f) of the Stock Broker Regulations, Clause A(2) of the Code of Conduct specified under Schedule II read with regulation 9(f) of the Stock Broker Regulations. Further, it was also alleged that Notice has connected to the secondary server, which was meant to be used in case of non-availability of data from Tick-by-Tick (TBT) primary source, repeatedly without valid reason, thus it has indulged in unfair trade practices in violation of Regulations 3(b), 3(c), 3(d) and 4(1) of PFUTP Regulations read with Sections 12A(a), 12A (b) & 12 A(c) of SEBI Act. Post investigation it was found that the broker had frequently connected to the secondary server during the year 2013 and 2014.

SEBI recorded that "By circumventing the primary source on a regular basis, the Noticee (Advent stock Broking) engaged in conduct which undermined the trading system set up to provide fair and equitable access to all brokers who connected to it."

SEBI remarked that the Noticee violated Point 2(a) of Chapter V of NSE bye-laws read along with Clause A (5) of the Code of Conduct specified under Schedule II read with regulation 9(f) of the Stock Broker Regulations, Clause A(2) of the Code of Conduct specified under Schedule II read with regulation 9(f) of the Stock Broker Regulations.

The Adjudicating Officer passed an order and imposed a penalty of 5,00,000/- (Rupees Five Lakh only) under section 15HA and 1,00,000/- (Rupees One Lakh only) under section 15HB of the SEBI Act upon the Noticee i.e. Advent Stock Broking Pvt. Ltd. a total penalty of Rs. Six Lakh.