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Sebi bans 6 entities from securities markets for violating insider trading norms

The Securities and Exchange Board of India (Sebi) has taken action against six entities for violating insider trading norms in the case of Shilpi Cable Technologies. The entities have been barred from participating in the securities markets for one year and have been ordered to pay penalties totaling Rs 70 lakh. Additionally, Sebi has directed them to disgorge the unlawful gains amounting to Rs 27.59 crore, along with 9 percent interest per annum from May 2017 until the date of payment.

Investigation and Proceedings

The investigation conducted by Sebi focused on the trading activities in the shares of Shilpi Cable Technologies Ltd (SCTL) from March to May 2017. The regulator sought to determine if certain entities had engaged in trading based on unpublished price-sensitive information (UPSI), which is in violation of the Prohibition of Insider Trading (PIT) rules. The UPSI in question was related to a demand notice issued by Macquarie Bank Ltd on behalf of the petitioner, seeking payment of USD 3.01 million (approximately Rs 19.55 crore), which SCTL received on March 10, 2017.

Violation of Insider Trading Norms

Sebi’s final order confirmed that the noticees had engaged in insider trading on multiple occasions during the relevant period and had unlawfully avoided significant losses. Consequently, their trades in SCTL’s shares during the UPSI period were found to be in violation of PIT regulations.

Entities’ Connections and Penalties

Sebi observed that Dinesh Gupta, Dinesh Gupta HUF (Hindu Undivided Family), and Rajesh Gupta had frequent communication with the promoters-directors of SCTL, indicating a compelling case for considering them as connected persons and insiders under the PIT rules. Furthermore, Nirmala Gupta, who is a relative of Dinesh and Rajesh, was found to be a connected person as all the trades in her account were executed by her insider relatives.

Sebi also determined that Dinesh Gupta HUF, being the HUF of Dinesh Gupta, an insider, would also fall within the purview of insider trading. Additionally, Rajesh Gupta HUF, as the major shareholder of Ajay Fincap Consultants, was considered an insider of SCTL.

Penalties Imposed:

As a result, Sebi imposed fines as follows: Rs 15 lakh each on Dinesh Gupta, Dinesh Gupta HUF, and Rajesh Gupta; Rs 10 lakh on Nirmala Gupta and Ajay Fincap Consultants; and Rs 5 lakh on Rajesh Gupta HUF.

Separate Violation by Orix Corporation:

In a separate order, Sebi penalized Orix Corporation with a fine of Rs 5 lakh for violating Mutual Fund regulations.

Securities and Exchange Board of India (Sebi), key points

  • Securities and Exchange Board of India (Sebi): Sebi is the regulatory body for securities markets in India.
  • Headquarters: Mumbai, Maharashtra, India.
  • Establishment: Sebi was established on April 12, 1992.
  • Chairperson: Madhabi Puri Buch took charge of chairman on 1 March 2022, replacing Ajay Tyagi, whose term ended on 28 February 2022. Madhabi Puri Buch is the first woman chairperson of SEBI.

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