News Update Indiabulls Venture Ltd and its executives in insider trading...

Indiabulls Venture Ltd and its executives in insider trading racket, fined by SEBI

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New Delhi, June 1 (ILNS): Indiabulls Venture Ltd and its top officers have been fined by market watchdog Securities and Exchange Board of India (SEBI) for insider trading. A Rs 1.05 crore fine was imposed on India Bulls Venture Limited, its former non-executive director, her husband and the firm’s company secretary by SEBI’s adjudicating officer Amit Pradhan.
The issue that came to light was of a rather simplistic, yet bold nature of insider trading, in which the promoters had bought shares for profiteering, even as a sale deed was being negotiated. The market responded positively to the news of the sale, driving share prices up 325.89% on the NSE.
The following is how the case developed:

On March 15, 2017 at 8:53 am, the company informed the NSE that on March 14, 2017, Indiabulls Distribution Services Limited a wholly owned subsidiary of the Company, had signed a definitive agreement to sell its 100% shareholding in India Land and Properties Limited at a consideration of Rs. 685 crore, to India Bulls Infrastructure Limited, a subsidiary of Indiabulls Real Estate Limited.

Following the announcement, the price of the scrip of the company on the block moved from an opening price of Rs 39.20 on March 15, 2017 to a closing price of Rs 166.95 on July 6, 2017, this showed that it registered a price rise of 325.89% in just 38 trading days. The high that the scrip touched was Rs 199.40, on June 22, 2017.

The unusual rise caught the eye of SEBI, and the watchdog observed that the connected entities of the Company, Pia Johnson and Mehul Johnson together bought 8.44 lakh shares of the company during February, 2017 and March 2017. Also, the bigger giveaway was that the two had indulged in no trading at all (in those scrips) during the six months prior to February 2017.

SEBI conducted an investigation into suspected insider trading activities in the scrip of the company for the period January 1, 2017 to November 3, 2017 to ascertain whether or not the parties had traded in the aforesaid scrip on the basis of unpublished price sensitive information, in contravention of the provisions of the SEBI Act, 1992, read with SEBI (Prohibition of Insider Trading) Regulations, 2015.

The term “unpublished price sensitive information” has been defined under Regulation 2(1)(n) of the PIT Regulations as follows:
“Unpublished price sensitive information” (UPSI) means any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the following:
(i) Financial results;
(ii) Dividends;
(iii) Change in capital structure;
(iv) mergers, de-mergers, acquisitions, delisting, disposals and expansion of business and such other transactions;
(v) Changes in key managerial personnel; and
(vi) Material events in accordance with the listing agreement.

It is intended that information relating to a company or securities, that is not generally available would be unpublished price sensitive information if it is likely to materially affect the price upon coming into the public domain.

The regulator noted that from the material available on record, wrongful gain accrued to the executive director and her husband through trading in the scrip of the Company, while in possession of said UPSI was Rs 35,10,739 and Rs 33,98,498.50, respectively.

The regulator opined that both found to be “connected persons” and thus, “insiders” and the information regarding sale /investment of IIL in ILPL is found to be UPSI in this matter and in terms of attendant circumstances; it is found that Pia Johnson is in possession of or access to said UPSI and Mehul Johnson being husband is also found to be having access to said UPSI.
Pia Johnson has violated the provisions of Section 12A (d) & (e) of SEBI Act, 1992 & Regulation 3(1) and 4(1) of the PIT Regulations and Mehul Johnson has violated the provisions of Section 12A (d) & (e) of SEBI Act, 1992 & Regulation 3(2) and 4(1) of the PIT Regulations respectively.
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Through another order, SEBI noted that Indiabulls Venture Limited failed to fulfil the responsibility to notify the period of closure of trading window and the company secretary Lalit Sharma failed to monitor adherence to the same.

The regulator says that both Indiabulls Venture Limited and Lalit Sharma deserves imposition of monetary penalty under section 15HB of the SEBI Act for the violation of the provisions of Clause 4 of Code of Conduct under Schedule B of Regulation 9(1) of the PIT Regulations read and Clause (V) of the Code of Conduct adopted by the Company as required under Regulation 9(1) of the PIT Regulations, 2015.

The regulator imposed the penalty under section 15G(i) and 15G(ii) of the SEBI Act on Pia Johnson of 25,00,000 and under section 15G(i) and 15HB of the SEBI Act, on Mehul Johnson of 25,00,000.
The regulator also imposed the penalty of 50,00,000 on Indiabulls Venture Limited and 5,00,000 on the company secretary Lalit Sharma for the laxity and carelessness shown.
The regulator concluded the proceedings by saying:
“In the event of failure to pay the said amount of penalty within 45 days of the receipt of this Order, recovery proceedings may be initiated under section 28A of the SEBI Act, 1992 for realization of the said amount of penalty along with interest thereon, inter alia, by attachment and sale of movable and immovable properties.” ILNS\KR\SJ

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