Allegations against the Noticees not established in the matter of PMC Fincorp

Allegations against the Noticees not established in the matter of PMC Fincorp

In the matter of PMC Fincorp Limited (PMC / Scrip / Company), SEBI (Securities and Exchange Board of India ) has disposed of the adjudication proceeding initiated against the Noticees i.e. Umesh Goyal (Noticee1) and Ashu Goyal (Noticee 2)and held that the allegation levelled against Noticees regarding violation of Section 12 A(a),(b),(c) of Securities and Exchange Board of India Act, 1992 r/w Regulation 3(a),(b),(c),(d) and Regulation 4(1), 4(2) (a), (e) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations) did not stand established.

Herein, SEBI initiated adjudication proceedings under Section 15HA of the SEBI Act, against Noticee1 and 2 for the alleged violations of the aforementioned Sections and Regulations of SEBI Act, 1992 and PFUTP Regulations pursuant to investigation in the scrip of PMC for the period March 29, 2012 to March 31, 2015 (IP/investigation period).

The key submissions of the Noticees included that issuance of the present Show Cause Notice(SCN) was based upon an erroneous premise as the Noticee had no association with any of the alleged connected parties during the period of investigation. Mr. Goyal, only became the director of JMS on April 16, 2015, i.e. after the period of investigation ended on March 31, 2015.

The Noticees also contended that their trading in the scrip had been independent and based upon their own analyses and business acumen. It was also mentioned by them that they undertook miniscule amount of trades and genuine trading.

The AO (Adjudicating Officer)has observed that Noticees 1 and 2 are husband and wife. The allegations against the Noticees were based on the connection of Noticee 1 established with JMS Financial Services Ltd., which was one of the connected entities, amongst a group of entities connected to each other.

The submission that Noticee 1 became director of JMS Financial on 16 April 2015, which is after the investigation period of 29 March 2012 to 31 March 2015 had been verified from the MCA website.

The impugned trades of the Noticees have happened between June 2012 and June 2014. Hence, at the time of the trading by the Noticees, there was no connection existing between the Noticees and JMS Financial and consequently with the other group entities.

With respect to the first Investigation Period of price rise, it was observed that the net LTP contribution by the Noticee 1 buy trades was negative Rs.32.7. Sell trades of the Noticee1had a net LTP contribution of negative Rs.0.45. Hence, whereas, there was price rise in PMC during this period, Noticee 1's trades caused negative price impact both on buy side and sell side.

The trading pattern by the Noticee of engaging in daily trades on both buy and sell side with varying quantity of shares traded, actually LTP contributed by the Noticee 1 based on all his trades of negative Rs.33.15and with no collusion or connection with any other entity and so the charge of price manipulation was not established.

With respect to second investigation period of price fall, it was opined that there was price fall in PMC share price. During this period, Noticee 2's trades caused positive price impact both on buy side and sell side. The trading pattern by the Noticee of engaging in daily trades on both buy and sell side, actually LTP contributed by the Noticee 2 based on all her trades of Rs.2.45and with no collusion or connection with any other entity, and so, the charge of price manipulation was not established.

With respect to third investigation period of price rise, it was held that the SCN had not referred to the positive LTP contribution of the sell trades of Noticee, and had stated that Noticee contributed negative LTP ina price rise period. However, with no collusion or connection with any other entity, and allegation of negative LTP in a price rise period, the charge of price manipulation was not established.

Lastly, for the fourth investigation period of price rise, it was opined that the net LTP contribution by the Noticee 2 buy trades was zero. However, the sell trades of the Noticee 2 had a net LTP contribution which was Rs.10.Out of 27sell trade of 150 shares on 13 March 2014, 5 sell trades contributed Rs.10.1 to LTP. The counterparty in these trade were scattered which had no connection with Noticee 2 and so, the charge of price manipulation was not established.