Securities and Exchange Board of India (SEBI): G. Mahalingam (Whole Time Member), while exercising powers conferred under Section 12(3) read with Section 19 of the SEBI Act and Regulation 27(5) of the Intermediaries Regulations, cancelled the certificate of registration of the Alliance Intermediaries and Network Private Limited (Noticee), on account of activity and willful issuance of fake and bogus contract notes against receipt of cash to show fictitious transactions as genuine ones and enable its clients to book fictitious speculative gains and short/long term gains/losses for tax purposes.
In the pertinent case, it was found by the Noticee was registered with the Securities and Exchange Board of India as a member of Inter-Connected Stock Exchange of India Limited. During 2004 to 2007, contract notes were issued by intermediaries (i.e. person of any business in the market) to clients (individual entities) on behalf of the Noticee on accepting cash from intermediaries and giving cheques by the Noticee to intermediaries. The Noticee was earning a commission of 0.15% for the deposit of cash in its various companies. Counsel appearing before the Investigating authority also presented the modus operandi of for issuing fake contract notes for speculative profits/losses on behalf of clients.
Therefore, recorded that as per the findings of the Income Tax Department, the Noticee was engaged in making accommodation entries for clients to facilitate speculative short term / long term profits/losses. And further noted that the activities of the Noticee, were inherently fraudulent and were aimed at aiding and abetting tax frauds. And held that the Noticee was no longer a ‘fit and proper person and thereby in respect of Alliance Intermediaries and Network Private Limited has violated Regulation 5(e) read with Regulation 5A of the Stock Brokers Regulations read with provisions of Schedule II of the Intermediaries Regulations.[Alliance Intermediaries and Network Private Limited, In re, 2021 SCC OnLine SEBI 24, decided on 09-03-2021]