Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

WTM/AB/IVD/ID5/16250/2022-23
SECURITIES AND EXCHANGE BOARD OF INDIA
CORAM: ANANTA BARUA, WHOLE TIME MEMBER

ORDER
Under Section 12(3) of Securities and Exchange Board of India Act, 1992 read
with Regulations 27 of Securities and Exchange Board of India (Intermediaries)
Regulations, 2008

In respect of:
S. No. Name of the intermediary Registration No.

1. Finquest Securities Pvt. Ltd. INB231236531

INB011236537

In the matter of Crest Ventures Ltd.

1. The present matter emanates from a show cause notice dated August 25, 2020
(hereinafter referred to as “SCN”) issued to Finquest Securities Pvt. Ltd. (hereinafter
referred to as “Noticee”) under Regulation 28(1) of the SEBI (Intermediaries)
Regulations, 2008 (hereinafter referred to as “Intermediaries Regulations, 2008”)
calling upon it to show cause as to why action as recommended by the Designated
Authority or any other direction/ penalty as deemed fit should not be issued/imposed on
it in terms of Regulation 28 (1) of the Intermediaries Regulations, 2008. The SCN
enclosed with it the Report of the Designated Authority (hereinafter referred to as
“Enquiry Report” or “ER”). The ER had made the following recommendation:

“….in terms of the provisions of regulation 27 of the Intermediaries

Regulations read with section 12(3) of the SEBI Act and regulation
27 (xiv) of the Brokers Regulations, I hereby recommend
suspension of the certificate of registration granted to the Noticee

Page 1 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

i.e. Finquest Securities Limited (PAN No.: AABCB7028F) as stock

broker for a period of six months.”

2. The ER observed that the Noticee has violated the provisions of Sections 12A (a), (b)
and (c) of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to
as “SEBI Act, 1992”) read with Regulations 3 (a), (b), (c) and (d), 4 (1), 4 (2) (a) of the
SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market)
Regulations, 1995 (hereinafter referred to as “PFUTP Regulations, 2003”) and Clause
A(2) of the Code of Conduct specified under Schedule II read with Regulation 9 of
the SEBI (Stock Brokers) Regulations, 1992 (hereinafter referred to as “Stock Brokers
Regulations, 1992”).

3. The ER states that Securities and Exchange Board of India (hereinafter referred to as
“SEBI”) conducted an investigation into the alleged irregularities in the trading in the
shares of Crest Ventures Ltd. (hereinafter referred to as “Crest”) during the period
December 15, 2011 to October 09, 2014 (hereinafter referred to as “Investigation
Period”) for possible violation of the provisions of the SEBI Act, 1992 and various rules
and regulations framed thereunder.

4. The ER further makes the following allegations/observations:

4.1. The price volume data of the scrip of Crest at BSE and NSE for the period before,
during and after the Investigation Period was noted as mentioned in following
graphs and tables:

Page 2 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

Chart-1: Price Volume movement of scrip of Crest at BSE

3200000 70
No.of Shares Close Price
2700000 60

2200000 50

1700000 40

1200000 30

700000 20

200000 10

-300000 0

Table-1: Price movement of scrip of Crest at BSE

Total
Period Dates Open High Low Close Vol/(Avg.
Vol.)
74.8 45.4
Pre Price 55.55 52.55
15/09/2011- (26/10/2011) (21/11/2011) 3289483/
Investigation
14/12/2011 169973 404 54824
Period Vol 404 12129
(25/10/2011) (15/09/2011)
66.70 46.45
Price 54.95 67.05
Patch 1 (Rise) 15/12/2011- (30/03/2012) (30/12/2011) 6487707/
30/03/2012 718750 1626 85365
Vol 49290 70078
(12/03/2012) (16/12/2011)
Patch 2(Fall) 67.85 25.30
Price 65 27.9
(No trading on 02/04/2012- (04/04/2012) (28/10/2013) 5322464/
Mar 31 & Apr 29/10/2013 642241 1 14043
Vol 52238 11409
1, 2012) (03/04/2013) (8 instances)
60.15 27
Price 28.4 60.15
Patch 3 (Rise) 30/10/2013- (22/01/2014) (05/11/2013) 799675/
22/01/2014 71962 6683 71962 13554
Vol 10797
(22/01/2014) (03/11/2013)
61.9 26.05
Price 61.9 29.5
Patch 4(Fall) 23/01/2014- (23/01/2014) (14/05/2014) 3901573/
14/05/2014 3061574 1 54952
Vol 36323 532
(28/03/2014) (05/02/2014)
64.5
26.4
Price 28.15 (30/09/2014) 55.5
Patch 5(Rise) 15/05/2014- (16/05/2014) 787282/
09/10/2014 8652
630817 16
Vol 1934 1575
(20/05/2014) (24/09/2014)
55 41.65
Post Price 53 49.5 226062/
10/10/2014- (05/01/2015) (28/102014)
Investigation 4614
08/01/2015 87187 20
period Vol 1575 710
(01/12/2014) (14/11/2014)

Page 3 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

Chart-2: Price Volume movement of scrip of Crest at NSE

800000 80
700000 Total Traded Quantity Close Price 70
600000 60
500000 50
400000 40
300000 30
200000 20
100000 10
0 0

Table-2: Price movement of scrip of Crest at NSE

Period Dates Open High Low Close Total Vol/(Avg.

Vol.)
Pric 70.95 45.55
Pre
15/09/2011- e 58.00 (17/10/2011) (18&24/11/2011) 55 3123530/5205
Investigatio
14/12/2011 137630 5 9
n Period
Vol 5 (30/09/2011) (15/092014) 8608
Patch 1 Pric 67.50 48.05
(Rise) e 55 (30/03/2012) (23/12/2011) 66.85
15/12/2011- 6610997/8698
(No trading
30/03/2012 7
on Mar 31 & 743121 157
Apr 1, 2012) Vol 39200 (26/03/2012) (26/12/2011) 126040
Pric
02/04/2012- e 66.85 69.70 27.35 28.50 3557740/1081
Patch 2(Fall)
29/10/2013 636451 1 4
Vol 20010 (25/02/2013) (6 times) 10218
Pric 61.7 26.4
Patch 3 e 28.30 (22/01/2014) (05/11/2013) 61.45
30/10/2013-
(Rise) 100426 936092/15866
22/01/2014
(22/01/2014) 5321
Vol 10465 (03/11/2013) 100426
Patch 4(Fall) 23/01/2014- Pric 63 25
259947/3880
14/05/2014 e 61 (23/01/2014) (09/05/2014) 28.05

Page 4 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

35287 1
Vol 35287 (23/01/2014) (04/03/2014) 268
Pric 63.45 26
Patch
15/05/2014- e 27 (30/09/2014) (15/05/2014) 60.95
5(Rise) 35656/502
01/10/2014* 2299 1
Vol 497 (21/05/2014) (6 times) 1
Pric 59.95 41
Post
13/10/2014*- e 57.95 (05/0/2015) (05/0/2015) 49
Investigatio 16078/595
08/01/2015 3452 1
n period
Vol 1 (05/0/2015) (13/10/2014) 105
*no trading till 12/10/2014

4.2. It was noted that during the Investigation Period, no major corporate
announcements were made by Crest other than declaration of financial results and
outcome of Board Meetings. The financial results of Crest as disseminated on
bseindia.com were as follows:
Table 3: Annual financial results of Crest during the investigation period
₹ in Million
Particulars 31-Mar-2015 31-Mar-2014 31-Mar-2013 31-Mar-2012
Revenue 1013.3 342.24 117.34 124.67
Other Income 5.06 1.92 0.14 0
Total Income 1018.36 344.16 117.48 124.67
Expenditure -808.11 -253.49 -35.85 -31.9
Interest -68.64 -80.98 -60.85 -50.21
PBDT 141.61 9.69 20.78 42.56
Depreciation -1.52 -0.41 -0.45 -0.51
PBT 140.08 9.28 20.33 42.05
Tax -30.1 2.34 0.1 2.53
Net Profit 109.98 11.62 20.43 44.58

From the above table, it is observed that Crest had reported net positive profit during
the financial Years 2012-2015. After declining in the Financial Year 2012-13, the net
profit had again increased in Financial Year 2014-15.
4.3. It was observed that following were the top 10 buy-broker and sell-broker who had
traded in the scrip of the Crest during the Investigation Period at BSE and NSE:
Table 4: Broker Concentration in the scrip of Crest
% of
Buy Broker Name Total Selling Broker Name Total % of Trd Vol
Trd Vol
BSE

Page 5 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

Finquest Securities 40,23,069 23.26 ITI Financial Services Ltd. 32,14,181 18.58
Pvt.Ltd.
Iti Financial Services Ltd. 37,16,609 21.49 Finquest Securities Pvt.Ltd. 30,84,924 17.83
Anand Rathi Share & Stock 19,24,210 11.12 Anand Rathi Share & Stock 19,35,520 11.19
Brokers Ltd. Brokers Ltd.
Nirman Share Brokers 12,38,838 7.16 Bharat J.Patel 15,43,702 8.92
Pvt.Ltd.
Iti Securities Ltd. 7,30,251 4.22 Nirman Share Brokers 12,38,838 7.16
Pvt.Ltd.
Bharat J.Patel 5,52,691 3.20 Vedika Securities Pvt.Ltd. 6,02,500 3.48
Oracle Securities Pvt.Ltd. 3,85,400 2.23 Ashlar Securities Private 3,49,033 2.02
Limited
Ashlar Securities Pvt.Ltd. 3,50,507 2.03 Fortune Equity Brokers (India) 3,35,000 1.93
Ltd.
Mpse Securities Ltd. 3,08,775 1.79 Mpse Securities Ltd. 3,08,775 1.79
Focus Shares & Securities 2,61,925 1.51 Focus Shares & Securities 2,63,509 1.52
Pvt.Ltd. Pvt.Ltd.
Top 10 Buy Brokers 1,34,92,275 78.01 Top 10 Selling Brokers 1,28,75,982 74.42
21.99 25.58
Remaining Brokers 38,06,426 Remaining Brokers 44,22,719

Total Traded Volume 1,72,98,701 100.00 Total Traded Volume 1,72,98,701 100.00
NSE
Finquest Securities Finquest Securities Pvt. Ltd. 28,71,000 25.18
28,95,110 25.40
Pvt.Ltd.
Anand Rathi Share & Stock Anand Rathi Share & Stock 20,49,956 17.98
19,82,339 17.39
Brokers Ltd. Brokers Limited
Nirman Share Brokers Nirman Share Brokers Pvt.Ltd 19,27,774 16.91
19,27,774 16.91
Pvt.Ltd.
ITI Securities Limited 6,93,674 6.09 Prashant Jayantilal Patel 6,10,000 5.35
Prashant Jayantilal Patel 6,10,000 5.35 JHP Securities Pvt.Ltd 6,10,000 5.35
JHP Securities Pvt ltd 6,10,000 5.35 ITI Securities Limited 1,91,894 1.68
Bhansali Value Creations Bhansali Value Creations Pvt 1,52,935 1.34
1,52,935 1.34
Pvt ltd ltd
South Asian Stocks Ltd. 1,42,273 1.25 Religare Securities Ltd. 1,50,162 1.32
Swastika Investmart Ltd Ikab Securities & Investment 1,44,729 1.27
1,25,404 1.10
Ltd
Affluence Shares And South Asian Stocks Ltd. 1,42,273 1.25
1,23,456 1.08
Stocks Pvt.Ltd
Top 10 Buy Brokers 92,62,965 81.25 Top 10 Selling Brokers 88,50,723 77.64
Remaining Brokers 21,37,467 18.75 Remaining Brokers 25,49,709 22.36
Total Traded Volume 1,14,00,432 100.00 Total Traded Volume 1,14,00,432 100.00

4.4. From the above table it was observed that Finquest Securities Pvt. Ltd. (hereinafter
referred to as “Noticee”) had the highest contribution of 23.26% in gross buy and
Page 6 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

ITI Financial Services Ltd had highest contribution of 18.58 in gross sell on BSE in
the scrip of Crest during the Investigation Period. The total buy volume by top ten
trading members was 1,34,92,275 shares and total sell volume was 1,28,75,982
shares which accounted for 78.01% and 74.42%, respectively, of the total traded
market volume of 1,72,98,701 shares of Crest on BSE during the investigation
period.
4.5. The Noticee had the highest contribution of 25.40% in gross buy and 25.18% in
gross sell on NSE in the scrip of Crest during the Investigation Period. The total buy
volume by top ten trading members was 92,62,965 shares and total sell volume was
88,50,723 shares which accounted for 81.25% and 77.64%, respectively, of the total
traded market volume of 1,14,00,432 shares of Crest on NSE during the
Investigation Period.
4.6. The details of top 10 buy clients and sell clients concentration on BSE and NSE in
the scrip of Crest during the Investigation Period is tabulated below:

Table 5: Client Concentration in the scrip of Crest at BSE and NSE

% of
Trd
Buy Client Name Total V Selling Client Name Total % of Trd Vol
o
l
BSE
Fine Estates Private Limited 34,81,95 20.1 Kempro Traders Private Limited 30,60,404 17.69
7 3
Fidelity Multitrade Pvt. Ltd. 19,82,19 11.4 Bharat Jayantilal Patel 15,43,702 8.92
5 6
Gajmukh Suppliers Private Limited 120,9,50 6.99 Pasha Finance Pvt. Ltd. 12,66,236 7.32
7
Pasha Finance Pvt. Ltd. 9,27,691 5.36 Gajmukh Suppliers Private Limited 12,09,507 6.99
Orange Mauritius Investments Ltd 6,30,000 3.64 Acira Consultancy Private Limited 11,82,605 6.84
Acira Consultancy Private Limited 6,27,853 3.63 Fidelity Multitrade Pvt. Ltd. 6,28,253 3.63
Bharat Jayantilal Patel 5,52,691 3.20 Matangi Traders Investors Pvt. Ltd. 6,02,500 3.48
Shirdi Dealers Private Limited 5,01,145 2.90 Shirdi Dealers Private Limited 5,01,145 2.90
Yogini Hemang Muchhala 4,77,500 2.76 Somerset India Fund Ac Rhodes 3,88,880 2.25
Diversified Fund
Pratibha Syntex Ltd. 4,25,245 2.46 Kaushalendra Phul Jha 2,71,692 1.57

Page 7 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

1,08,15,7 62.5
1,06,54,92
Top 10 Buy Clients 8 2Top 10 Selling Clients 61.60
4
4
64,82,91 37.4
Remaining Clients Remaining Clients 66,43,777 38.40
7 8
1,72,98,7 100.
1,72,98,70
Total Traded Volume 0 0Total Traded Volume 100.00
1
1 0
NSE
Gajmukh Suppliers Pvt Ltd 18,80,68 16.5 Gajmukh Suppliers Pvt Ltd 18,80,684 16.50
4 0
Bharat Patel 13,23,70 11.6 Fidelity Multitrade Pvt. Ltd. 13,65,544 11.98
3 1
Pasha Finance Pvt Ltd 9,43,554 8.28 Pasha Finance Pvt Ltd 6,22,163 5.46
Acira Consultancy Pvt.Ltd 6,27,853 5.51 Prashant Patel 6,10,000 5.35
Aatash Shares & Commodities 6,10,000 5.35 Aatash Shares & Commodities Broking 6,10,000 5.35
Broking Pvt.Ltd. Pvt.Ltd.
Prashant Patel 6,10,000 5.35 Yogini Hemang Muchhala 4,77,500 4.19
Fine Estates Pvt.Ltd 3,32,171 2.91 Pratibha Syntex Ltd. 4,59,277 4.03
Pratibha Syntex Ltd. 2,57,195 2.26 Bharat Patel 3,32,692 2.92
Kempro Traders Pvt.Ltd 2,18,781 1.92 Sunita Patidar 2,06,927 1.82
Ashok Kumar Vasudeva 1,99,324 1.75 Ashok Kumar Vasudeva 1,60,303 1.41
Top 10 Buy Clients 70,03,26 61.4 Top 10 Buy Clients
67,25,090 58.99
5 3
Remaining Clients 43,97,16 39.5 Remaining Clients
46,75,342 61.01
7 7
Total Traded Volume 1,14,00,4 Total Traded Volume
1,14,00,43
3 100 100
2
2

4.7. Based on Know Your Client (KYC)/Unique client code (UCC) details, MCA website
(for common directors), Bank statements and Off market transfers, 16 entities were
identified as ‘suspected entities’ (hereinafter referred to as “Bharat Patel Group”).
The details of the 16 ‘suspected entities’ are as follows:
Table No. 6: Suspected entities of Bharat Patel Group
Sr. no. PAN No. Entity Name Sr. no. PAN No. Entity Name
Bharat Jayantilal
1 AAAPP6652R 9 AAACP3115E Pat Financial Consultants Pvt. Ltd.
Patel
2 ANDPP9202F Ruchit Bharat Patel 10 AAICA9489N Acira Consultancy Pvt. Ltd.
3 AACPP5126G Minal Bharat Patel 11 AACCG3017C Gandiv Investment Pvt. Ltd.

Page 8 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

4 AHIPP1407H Hardik Bharat Patel 12 AACCH5285R Hridaynath Consultancy Pvt. Ltd.

Prashant Jayantilal
5 AABPP2156M 13 AABCP1438P Pranav Holdings Pvt. Ltd.
Patel
Pankaj Jayantilal
6 AABPP2157L 14 AABCF0017A Fidelity Multitrade Pvt. Ltd.
Patel
7 ABAPS7558L Vanraj Vinod Shah 15 AAFCM3690Q Moneybee Realty Pvt. Ltd.
Ajaykumar
8 AAGPK6090A 16 AAACP8316P Pasha Finance Pvt. Ltd.
Banwarilal Kejriwal

4.8. Out of the 16 ‘suspected entities’ in the Bharat Patel Group, following 5 ‘suspected
entities’ have traded in the scrip of Crest during the investigation period:

Table 7: Summary of trading by Bharat Patel Group in the scrip pf Crest during the investigation period

% of
% of Gross
Gross
Name of Entity Gross Buy Buy to Mkt. Gross Sell Net Qty.
Sell to
Vol
Mkt. Vol
BSE
Bharat Jayantilal Patel 5,52,691 3.20 15,43,702 8.92 -991011
Pasha Finance Pvt. Ltd. 9,27,691 5.36 12,66,236 7.32 -338545
Acira Consultancy Pvt Ltd 6,27,853 3.63 11,82,605 6.84 -554752
Fidelity Multitrade Pvt. Ltd. 19,82,195 11.46 6,28,253 3.63 1353942
Pat Financial Consultants Pvt. Ltd 7,830 0.05 7,830 0.05 0
Total 40,98,260 23.69 46,28,626 26.76
NSE
Bharat Jayantilal Patel 13,23,703 11.61 3,32,692 2.92 991011
Pasha Finance Pvt. Ltd. 9,43,554 8.28 6,22,163 5.46 321391
Acira Consultancy Pvt Ltd 6,27,853 5.51 73,101 0.64 554752
Prashant Patel 6,10,000 5.35 6,10,000 5.35 0
Fidelity Multitrade Pvt. Ltd. 0 0.00 13,65,544 11.98 -1365544
Total 35,05,110 30.75 30,03,500 26.35 501610

4.9. It was observed that Bharat Patel Group was net seller of 5,30,366 shares of Crest
wherein it purchased 40,98,260 shares (23.69% of total market volume) and sold
46,28,626 (26.76 % of total market volume) at BSE. At NSE, Bharat Patel Group
was net buyer of 5,01,610 shares of Crest wherein it purchased 35,05,110 shares

Page 9 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

(30.75% of total market volume) and sold 30,03,500 (26.35 % of total market
volume).
4.10. It was also noted that aforementioned 5 suspected entities of the Bharat Patel Group
had executed synchronised trades on BSE within the group for 30,35,839 shares of
Crest (17.55% of the market volume) in 16 trades over 8 trading days. Details of
Bharat Patel Group's contribution is as follows:
Table 8: Details of Contribution of Bharat Patel Group to synchronised trades in the scrip of Crest

Gross Buy Gross Sell Qty Gross Total Total traded qty Sync traded Sync Trades as % of Sync Trades as
Qty of Bharat of Bharat Patel among Bharat qty by Bharat total traded qty among % of Total
Patel Group Group Patel Group Patel Group Bharat Patel Group market volume
BSE
40,98,260 46,28,626 87,26,886 34,77,474 30,35,839 87.30 17.54
NSE
35,05,110 30,03,500 65,08,610 23,92,545 5,63,732 23.56 4.94

Table 9: Details of the entity-wise synchronized trades by Bharat Patel Group in the scrip of Crest

Synchronised % of Sync. Vol. No. of No of

Buyer Seller Qty. to Mkt. Vol. Trades days
BSE
Pasha Finance Pvt. Ltd Acira Consultancy Pvt Ltd 6,31,893 3.65 2 2
Fidelity Multitrade Pvt. Ltd Pasha Finance Pvt. Ltd 6,18,912 3.58 9 1
Fidelity Multitrade Pvt. Ltd Bharat Jayantilal Patel 6,10,597 3.53 1 1
Fidelity Multitrade Pvt. Ltd Acira Consultancy Pvt Ltd 1,802 0.01 1 1
Bharat Jayantilal Patel Acira Consultancy Pvt Ltd 5,48,101 3.17 1 1
Acira Consultancy Pvt Ltd Pat Financial Consultants Pvt. Ltd 3,330 0.02 1 1
Acira Consultancy Pvt Ltd Pasha Finance Pvt. Ltd 6,21,204 3.59 1 1
30,35,839 17.55 16 8
NSE
Pasha Finance Pvt. Ltd Bharat Jayantilal Patel 3,32,500 2.92 5 5
Pasha Finance Pvt. Ltd. Fidelity Multitrade Pvt. Ltd 7,641 0.07 1 1
Bharat Jayantilal Patel Pasha Finance Pvt. Ltd 1,80,402 1.58 1 1
Acira Consultancy Pvt Ltd Bharat Jayantilal Patel 192 0.00 1 1
Acira Consultancy Pvt Ltd Fidelity Multitrade Pvt. Ltd 42,997 0.38 1 1
5,63,732 4.95 9 9

Page 10 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

4.11. In view of the above, it was noted that the trades of aforementioned 5 ‘suspected
entities’ of the Bharat Patel Group at BSE have violated the provision of Section
12A (a), (b) and (c) of SEBI Act, 1992 read with Regulations 3 (a), (b), (c) and (d),
4(1) and 4(2) (a) and (g) of the PFUTP Regulations, 2003. No adverse inference
was drawn from the trades of aforementioned 5 ‘suspected entities’ of the Bharat
Patel Group at NSE.

4.12. The Noticee, as a Stock Broker had undertaken trades for aforementioned 5
‘suspected entities’ at BSE, and they were closely associated with each other by
way of the aforesaid undisputed connection. Two of the ‘suspected entities’ namely,
Hardik Bharat Patel and Minal Bharat Patel are directors of Noticee. Given the
above facts and scenarios of the case, it is noted that while dealing in the scrip of
Crest, activities of aforementioned 5 ‘suspected entities’ and the Noticee were
aligned and it is clear that they acted in concert.

4.13. The Noticee was the broker and counterparty broker for 14 out of 16 synchronized
trades in the scrip of Crest at BSE for a quantity of 18,77,141 shares (61% of the
synchronized trades of the Bharat Patel Group and 2.33% of the market volume)
during the investigation period. All the buy and sell synchronised trades were
executed from terminal ID 4 and 6 of the Noticee. Hence, the Noticee, along with
aforementioned 5 ‘suspected entities’ of Bharat Patel Group who have repetitively
executed synchronized trades on BSE and NSE within the group and are
responsible for creating misleading appearance of trading in scrip of Crest in the
securities market.

5. On the basis of the aforesaid ER, the matter was placed before me for approval of
issuance of the SCN on August 10, 2020. Thereafter, the SCN was issued on August
25, 2020. Due to the prevailing pandemic situation, the SCN was issued to the Noticee
by email. However, no reply was received form the Noticee. Thereafter, after resumption

Page 11 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

of postal services the SCN was again forwarded by Speed Post Acknowledgment Due
(SPAD) to the Noticee along with letter dated March 08, 2021 which was served on the
Noticee. The file was placed before me for obtaining a hearing date on March 19, 2021.
An opportunity of hearing was granted on June 17, 2021. Vide email dated June 14,
2021 the Noticee sought an adjournment of 4 weeks. In view of the same, another
opportunity of hearing was granted to the Noticee on November 17, 2021. Meanwhile
the Noticee submitted detailed reply dated September 30, 2021 stating as follows:

i) The Noticee disputed and denied everything that has been stated in the said
SCN and the DA Report and the allegations raised therein are based on false
and erroneous presumptions and without any cogent evidence. It is settled law
that the burden of proof is on the person making allegations and not vice -
versa. No provisions of law have been violated as has been alleged in the
said SCN and/or DA Report and no adverse recommendations shall be
warranted as sought in the said SCN and DA Report. Primarily, on this ground
alone, the present proceedings ought to be dropped.
ii) At the further outset, the said SCN and the DA Report are liable to be struck
down on account of inordinate delay in issuing the same.
iii) The Noticee has been brokers of the two Stock Exchanges (BSE/NSE) for the
last 16 years. Presently, it has over 5000 registered clients, and its annual
turnover is approximately Rs.l0,888/- Crores in the F.Y. 2020-21 across all
Segments and Exchanges. It is respectfully submitted that the allegations in the
SCN and DA Report and the recommendation therein needs to be considered in
the conspectus of the said demonstrable facts of the total turnover and total client
base, in which case it would be obvious that the trades of the clients which
are impugned in the DA Report are miniscule and obviously did not merit any special
consideration or scrutiny.
iv) Most of the impugned trades that were executed were in excess of 0.5% of the
equity capital of the scrip of Crest and such trades ought to have been displayed
on bulk deal window of the Stock Exchange [the individual orders on last day
were less than 0.5% threshold limit]. Each of the impugned trades were

Page 12 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

expressly and separately reported to the Stock Exchange and were even
disclosed on their websites.
v) Such trades were executed at the market price of the scrip and full
payment by the buyer and delivery thereof was made to the buyer immediately,
as no grievances were raised or are available of the Stock Exchanges website.
In fact, since the said shares were delivered and transferred from each seller
to each buyer, each of the aforesaid 5 entities had at the relevant time become
the duly registered owner and holder of the respective shares, and therefore as
per sections 2(a) and 10 (3) of the Depositories Act, the beneficial ownership
had in fact been duly and legally transferred. In other words, the ownership of
all these shares were duly transferred to and in favour of the buyer.
vi) The shares were openly sold in accordance with Stock Exchange
Mechanism. They were admittedly transferred, and beneficial ownership did
get transferred. The 16 Impugned Trades were all on different days spanning
between l2th March 2012 to 20th March 2014, and all for different
quantities and the variation in quantity was from 192 shares to more than
6,00,000 shares. It is therefore reiterated that the same cannot be alleged to
be synchronised trades.
vii) The Company is a separate legal entity having its own identity distinct from its
members and clients. As regards the "connections" alleged in the DA Report,
it is submitted that the same are not relevant, since there is no bar to
"connected" parties trading or for an intermediary to cater to their clients who
may be connected. In fact, even negotiated trades between connected parties
are expressly permitted and are very common. Therefore, per se there can be
no violation ascribed to the clients or to the Noticee. In any event, the said
connections of the Company with the said 5 entities were merely of a broker-
client, and any other incidental connection is of no relevance. Further, the
Company exercises high standards of integrity, fairness, due skill, care and
diligence in execution of all trades.

On November 17, 2021 the Noticee appeared for the hearing and made submissions.

Page 13 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

Consideration of issues and findings:

6. I have gone through the SCN, ER, reply of the Noticee and its submissions before me
during the personal heating. I note that the allegation against the Noticee is that Noticee,
along with aforementioned 5 ‘suspected entities’ of Bharat Patel Group who have
repetitively executed synchronized trades in the scrip of Crest on BSE and NSE within
the group are responsible for creating misleading appearance of trading in scrip of Crest
in the securities market and thereby violated Sections 12A (a), (b) and (c) of the SEBI
Act, 1992 read with Regulations 3 (a), (b), (c) and (d), 4 (1), 4 (2) (a) of PFUTP
Regulations, 2003. It is also alleged that the Noticee failed to carry out its business with
due diligence, skill, care etc. while dealing with its clients in violation of Clause A (2) of
Schedule II under Regulation 9 of the Stock Brokers Regulations, 1992.

7. The relevant extracts of the provisions of law allegedly violated by the Noticee are
mentioned as under:-

SEBI Act
Prohibition of manipulative and deceptive devices, insider trading and substantial
acquisition of securities or control.
12A. No person shall directly or indirectly—
(a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed
to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance
in contravention of the provisions of this Act or the rules or the regulations made thereunder;
(b) employ any device, scheme or artifice to defraud in connection with issue or dealing in securities
which are listed or proposed to be listed on a recognised stock exchange;
(c) engage in any act, practice, course of business which operates or would operate as fraud or
deceit upon any person, in connection with the issue, dealing in securities which are listed or
proposed to be listed on a recognised stock exchange, in contravention of the provisions of this Act
or the rules or the regulations made thereunder;

PFUTP Regulations
3. Prohibition of certain dealings in securities
No person shall directly or indirectly—
(a) buy, sell or otherwise deal in securities in a fraudulent manner;
(b) use or employ, in connection with issue, purchase or sale of any security listed or proposed to
be listed in a recognized stock exchange, any manipulative or deceptive device or contrivance in
contravention of the provisions of the Act or the rules or the regulations made there under;
(c) employ any device, scheme or artifice to defraud in connection with dealing in or issue of
securities which are listed or proposed to be listed on a recognized stock exchange;

Page 14 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

(d) engage in any act, practice, course of business which operates or would operate as fraud or
deceit upon any person in connection with any dealing in or issue of securities which are listed or
proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act
or the rules and the regulations made there under.

4. Prohibition of manipulative, fraudulent and unfair trade practices

(1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an
unfair trade practice in securities.
(2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves
fraud and may include all or any of the following, namely:—
(a) indulging in an act which creates false or misleading appearance of trading in the securities
market;

Brokers Regulations, 1992

SCHEDULE II
Securities and Exchange Board of India (Stock Brokers) Regulations, 1992
CODE OF CONDUCT FOR STOCK BROKERS
[Regulation 9]
A. General.
(1) …
(2) Exercise of due skill and care: A stock-broker shall act with due skill, care and diligence in the
conduct of all his business.

8. I note that the SCN alleges that 5 entities of the Bharat Patel Group purchased
40,98,260 shares of Crest (which consisted of 23.69% of total market volume on the buy
side in the scrip of Crest during the Investigation Period) and sold 46,28,626 shares of
Crest (which consisted of 26.76 % of total market volume of the sell side in the scrip of
Crest during the Investigation Period) at BSE. The Group was net seller of 5,30,366
shares of Crest at BSE. At NSE, these 5 clients bought 35,05,110 shares of Crest
(30.75% of total market volume on the buy side during the Investigation Period) and sold
30,03,500 shares of Crest (26.35 % of total market volume on the sell side during the
Investigation Period). The Group was net buyer of 5,01,610 shares of Crest at NSE. The
SCN further observes that these five clients belonging to “Bharat Patel Group” executed
16 trades in a synchronized manner during the Investigation Period stretching from
December 15, 2011 to October 09, 2014 and the Noticee was the broker and
counterparty broker for 14 out of 16 synchronized trades at BSE in the scrip of Crest
executed by the “Bharat Patel Group” for a quantity of 18,77,141 shares (61% of the
synchronized trades of the Bharat Patel Group and 2.33% of the market volume) during

Page 15 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

the Investigation Period. The SCN also observes that these 5 clients were related to
each other and the Noticee.

9. From the ER it is observed that these 5 clients executed such synchronized trades on
BSE in the scrip of Crest amongst themsleves for 30,35,839 shares (17.55% of the
market volume) in 16 trades over 8 trading days out of which in 14 trades the Noticee
was the stock broker on both sides during the Investigation Period from December 15,
2011 to October 09, 2014. In this regard, the order log and trade log for the impugned
16 trades reveals the following details:

Date Buyer Name Seller Name Trade Time Price Quan

Quantity Difference Differe tity
nce Differ
ence
12.03.2012 Acira Consultancy Pasha Finance Pvt. 621204.00 00:00:03 0.00
Private Limited Ltd.
14.03.2012 Bharat Jayantilal Acira Consultancy 548101.00 00:00:03 0.00 0.00
Patel Private Limited
20.03.2012 Fidelity Multitrade Bharat Jayantilal Patel 610597.00 00:00:08 0.00 0.00
Pvt. Ltd.
28.03.2013 Pasha Finance Pvt. Acira Consultancy 4393.00 00:00:10 0.00 0.00
Ltd. Private Limited
03.04.2013 Fidelity Multitrade Acira Consultancy 1802.00 00:00:11 0.00 0.00
Pvt. Ltd. Private Limited
03.04.2013 Pasha Finance Pvt. Acira Consultancy 627500.00 00:00:00 0.00 0.00
Ltd. Private Limited
08.05.2013 Acira Consultancy Pat Financial 3330.00 00:00:01 0.00 0.00
Private Limited Consultant Pvt Ltd
20.03.2014 Fidelity Multitrade Pasha Finance Pvt. 70000.00 00:00:03 0.00 0.00
Pvt. Ltd. Ltd.
20.03.2014 Fidelity Multitrade Pasha Finance Pvt. 70000.00 00:00:03 0.00 0.00
Pvt. Ltd. Ltd.
20.03.2014 Fidelity Multitrade Pasha Finance Pvt. 58912.00 00:00:03 0.00 0.00
Pvt. Ltd. Ltd.
20.03.2014 Fidelity Multitrade Pasha Finance Pvt. 70000.00 00:00:03 0.00 0.00
Pvt. Ltd. Ltd.

Page 16 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

20.03.2014 Fidelity Multitrade Pasha Finance Pvt. 70000.00 00:00:03 0.00 0.00
Pvt. Ltd. Ltd.
20.03.2014 Fidelity Multitrade Pasha Finance Pvt. 70000.00 00:00:03 0.00 0.00
Pvt. Ltd. Ltd.
20.03.2014 Fidelity Multitrade Pasha Finance Pvt. 70000.00 00:00:03 0.00 0.00
Pvt. Ltd. Ltd.
20.03.2014 Fidelity Multitrade Pasha Finance Pvt. 70000.00 00:00:03 0.00 0.00
Pvt. Ltd. Ltd.
20.03.2014 Fidelity Multitrade Pasha Finance Pvt. 70000.00 00:00:03 0.00 0.00
Pvt. Ltd. Ltd.

10. I note that the 5 clients have executed 16 synchronized trades (out of which Noticee
was the stock broker for 14 trades which have been hereafter referred to as impugned
trades) in the scrip of Crest wherein the price and quantity were matching between the
buy and sell orders and time difference was almost 0, on 8 trading days out of an
Investigation Period stretching over almost three years from December 15, 2011 to
October 09, 2014. The SCN does not allege any connection between Crest and the
clients/ Noticee or any modus operandi through which the Noticee or clients gained any
advantage due to the increased volume of trading in the scrip of Crest during the
Investigation Period spanning from December 15, 2011 to October 09, 2014. The
Noticee has also submitted that all the 5 clients of the Noticee have taken delivery of the
shares of Crest therefore it cannot be said that these clients carried out the impugned
trades without any intention of change in beneficial ownership of the securities.

11. In regard to synchronized trades, in the matter of SPJ Stock Brokers Pvt. Ltd. vs. SEBI
(Appeal No. 52 of 2013 decided on September 04, 2013) the Hon’ble Securities
Appellate Tribunal (hereinafter referred to as “SAT”) has taken the following view:

“12. Penalty under impugned order is imposed upon appellant solely on ground that
almost all trades in shares of Adani Exports Ltd. effected by appellant during
investigation were found to be synchronized and those trades were with only one
group. It is well established by various decisions by this Tribunal that synchronized
trade is per se not illegal. Synchronized transaction would be illegal if it is executed
with a view to manipulate the market, is dubious in nature and is executed with a
view to avoid regulatory detection, does not involve change of beneficial

Page 17 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

ownership or is executed to create false volumes resulting in upsetting market

equilibrium etc.”

12. From the above observations by the Hon’ble SAT, I note that synchronized trades per
se are not illegal, they are only treated to be illegal if it is executed with a view to
manipulate the market, is dubious in nature and is executed with a view to avoid
regulatory detection, does not involve change of beneficial ownership or is executed to
create false volumes resulting in upsetting market equilibrium etc. In the present matter,
firstly, there is no material on record to show that there was price manipulation or that
the clients of the Noticees indulged in creation of false volume and this false volume led
to manipulation or that there was any connection between the Noticee and Crest to
create volume in the scrip of Crest. Secondly, it is observed that the clients have taken
delivery and there was change in beneficial ownership of the shares. Thirdly, I also note
that the less frequency of the trades (14 trades in the scrip of Crest spread over almost
three years) compared to the Noticee’s gross trading volume for all clients (turnover of
more than 10,000 crores in 20-21) also show that it would be a reasonable explanation
on the part of the Noticee that these synchronized trades could not be detected by the
Noticee or the Noticee failed to exercise due diligence. Moreover, I note that vide order
dated March 30, 2022 the proceedings with respect to the five clients of the Noticee with
respect to the same synchronized trades alleging violation of PFUTP Regulations, 2003
has been disposed of without any adverse directions. In this regard, the following
observation of the Hon’ble Supreme Court of India in its decision dated February 23,
2016, with regard to liability of stock broker with respect to wrongful trades of clients, in
SEBI vs. Kishore R. Ajmera (2016) 6 SCC 368 is relevant:

“24. Insofar as first case (C.A. No.2818 of 2008 SEBI Vs.Kishore R. Ajmera) is
concerned the proved facts are as follows:
(i) Both the clients are known to each other and were related entities.
(ii) This fact was also known to the sub-broker and the respondent – broker.
(iii) The clients through the sub-broker had engaged in mutual buy and sell
trades in the scrip in question, volume of which trade was significant,
keeping in mind that the scrip was an illiquid scrip.
Apart from the above there is no other material to hold either lack of vigilance or
bona fides on the part of the sub-broker so as to make respondent-broker liable.
Page 18 of 19
 Order in the matter of enquiry proceedings against Finquest Securities Pvt. Ltd.

An irresistible or irreversible inference of negligence/lack of due care etc., in our

considered view, is not established even on proof of the primary facts alleged so
as to make respondent-broker liable under the Conduct Regulations, 1992 ….”

13. Therefore, in view of the above and in the facts and circumstances of the present case,
I find that the 14 impugned trades in the scrip of Crest executed by the clients of Noticee
over a period spanning three years from December 15, 2011 to October 09, 2014 cannot
be attributed to the connivance or negligence of the Noticee so as to attract the violations
as alleged in the SCN. In addition, it is observed that the clients of the Noticee have also
been exonerated vide order dated March 30, 2022 and therefore proceedings against
the Noticee for its alleged connivance with its clients or negligence also does not survive
in the facts and circumstances of the present case.

Direction:

14. In view of the above, I, in exercise of the powers conferred upon me in terms of Section
12(3) and Section 19 of the Securities and Exchange Board of India Act, 1992 read with
Regulation 27 (5) of the Intermediaries Regulations, hereby dispose of the show cause
notice dated August 25, 2020 issued to the Noticee, without any direction.

15. The order comes into force with immediate effect.

16. A copy of this order shall be served on the Noticee and all recognized Stock Exchanges.

Place: Mumbai ANANTA BARUA

Date : April 29, 2022 WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

Page 19 of 19