Case Overview

This adjudication order stems from an investigation by SEBI into trades placed through Pace Stock Broking Services Private Limited (the Noticee) suspected of front-running the trades of Axis Mutual Fund. The investigation period was from April 1, 2020, to March 31, 2022.

The principal allegations against the Noticee were twofold:

1. Failure to Maintain and Provide IP Address Logs: The Noticee, classified as a Type III stock broker, was required under SEBI Circular No. CIR/MRD/DMS/34/2013 dated November 6, 2013, to maintain and preserve data mapping IP addresses to specific user IDs for trades. SEBI alleged that for 93 specific instances, the Noticee failed to provide the corresponding IP addresses associated with the specific user ID/dealer/trader for the respective trades during the investigation, despite repeated summons. The Noticee claimed technical constraints and COVID-19 challenges prevented it from providing this data in the mandated format.

2. Incorrect User/Dealer Mappings and Submissions:

  • Mr. Kaleeswaran Pandian: Investigation revealed that terminal IDs (600026875001, 201010805001) and user IDs (27303, 31468, 36434, 36512) were registered with the National Stock Exchange (NSE) in the name of Mr. Kaleeswaran Pandian as a dealer/approved person for the Noticee from September 14, 2015, to April 27, 2022. However, both the Noticee and Mr. Pandian confirmed he was never associated with the broker as a dealer and was unaware of the IDs. The Adjudicating Officer rejected the Noticee's claim of a "clerical copy-paste error," noting the credentials were renewed/updated multiple times over seven years.
  • Mr. Rajeev Ranjan: The Noticee submitted that Mr. Rajeev Ranjan was the approved person/dealer for user ID 31468 from March 2020 to March 2022. NSE records showed he was only officially registered from November 2022 to January 2025, and the user ID had been registered to four other individuals. The AO found the Noticee's submissions to be incorrect and misleading to the investigation.

The Adjudicating Officer concluded that these actions violated:

  • SEBI Circular dated November 6, 2013.
  • NSE Consolidated Circular on User ID requests dated April 13, 2017, and several specific NSE circulars.
  • Regulations 9(b) and 9(f) of the SEBI (Stock Brokers) Regulations, 1992.
  • Clauses A(1), A(2), and A(5) of the Code of Conduct for Stock Brokers.
  • Section 11C(3) of the SEBI Act, 1992 (failure to furnish required information).

The Noticee's defenses, including the scale of operations (over 2,500 CTCL IDs), technical limitations, and lack of mens rea, were rejected. The AO cited Supreme Court precedent that penalty is attracted upon contravention, irrespective of intention.

Final Outcome

The Adjudicating Officer imposed a total monetary penalty of ₹4,00,000 (Rupees Four Lakh) on Pace Stock Broking Services Private Limited under the following sections of the SEBI Act, 1992:

  • ₹1,00,000 under Section 15A(a) for furnishing false/incorrect information.
  • ₹1,00,000 under Section 15A(c) for failure to maintain books of account/records.
  • ₹2,00,000 under Section 15HB for contravention where no separate penalty is provided.

The penalty must be paid within 45 days of receipt of the order via SEBI's online portal. The order considered the lack of quantifiable unfair gain or investor loss but noted the repetitive nature of the default, referencing three previous actions against the Noticee, including an administrative warning and a ₹6 lakh penalty in the NSE Co-Location matter.

Topics: SEBI Enforcement, Broker Compliance, Market Regulation