SEBI penalises two entities for insider trading violation in shares of Rupa and Co

Capital markets regulator Sebi (Securities and Exchange Board of India) has levied penalties totalling Rs 20 lakh on two entities for flouting insider trading norms in the shares of Rupa and Company Ltd (RCL).

The regulator imposed a fine of Rs 10 lakh each on Sushil Patwari, independent director of RCL, and Nagreeka Capital and Infrastructure Ltd (NCIL).

The order came after Sebi conducted an investigation in the scrip of RCL to ascertain whether certain entities had traded in the company during February-June 2021, while in possession of unpublished price-sensitive information.

The price-sensitive information related to the announcement of financial results for the quarter and year ended March 2021. The period of the information was May 1-31, 2021.

In its 28-page order on Friday, Sebi said Patwari had been a member of the audit committee of RCL since June 2004, and the same was confirmed by NCIL, RCL, as well as the annual report of RCL for FY2020-21.

Therefore, it is quite evident that Patwari was an insider and connected to RCL, it added.

The regulator also noted that RCL's manager - finance had shared the financial and related papers with the company's whole-time directors and independent directors, including Patwari.

Also, the regulator observed that the unpublished price-sensitive information was passed on to NCIL by Patwari, who was the chairman in the executive capacity of NCIL and had a reasonable influence on the trading decisions of the firm.

Thereafter, NCIL bought shares of RCL one day prior to the disclosure of financial results by RCL. They were subsequently sold on the very next day, after disclosure of the price-sensitive information, Sebi said in the order.

The amount of disproportionate gain or unfair advantage by NCIL while trading in the shares of RCL was to the tune of Rs 2.37 lakh.

Insider trading rules prohibit the trading of the shares of the company by insiders while in possession of unpublished price-sensitive information, the order said.

Through such acts, Patwari has violated the Prohibition of Insider Trading rules by communicating the information to NCIL, and NCIL has flouted the norms by trading while in possession of the price-sensitive information, Sebi said.

Meanwhile, in four separate orders on Friday, the capital markets watchdog imposed fines totalling Rs 20 lakh on four entities for indulging in non-genuine trades in the illiquid stock options segment on the Bombay Stock Exchange.

Individually, Sebi slapped a fine of Rs 5 lakh each on Marsh Vinimay, Sudha Somani, Paramdham Vinimay, and Nareshbhai Gordhanbhai Panchal.