In February 2021, SEBI’s system generated insider trading alerts related to Poonawalla Fincorp’s shares
Securities and Exchange Board of India (SEBI) on Wednesday barred Poonawalla Fincorp Managing Director Abhay Bhutada and seven other entities from the securities market for alleged insider trading activities in the shares of the company, which was earlier known as Magma Fincorp.
Besides, the regulator has ordered impounding of wrongful gains worth over ₹13 crore, according to an interim order.
In February 2021, the watchdog’s system generated insider trading alerts related to the company’s shares. It was also the time around when an announcement was made regarding Rising Sun Holding Pvt Ltd (RSHPL), part of the Poonawalla Group, acquiring a controlling stake in Magma Corp.
Following the alerts, SEBI conducted a preliminary examination into the shares of Magma Corp to check whether there have been insider trading activities.
In the 36-page interim order, SEBI said Mr. Bhutada who had access to the UPSI (Unpublished Price Sensitive Information) seemingly engaged and indulged in such fraudulent activities by way of transmitting the UPSI to multiple connected entities enabling them to indulge in insider trading activities.
Mr. Bhutada was working as Managing Director and CEO of Poonawalla Finance Pvt. Ltd., a subsidiary of RSHPL. He is now the Managing Director of Poonawalla Fincorp, which was earlier known as Magma Fincorp, as per the order.
Apart from Mr. Bhutada, others who have been barred are Saumil Shah, Surabhi Kishore Shah, Amit Agrawal, Murlidhar Bagranglal Agrawal, Rakesh Rajendra Bhojgadhiya, Rakesh Rajendra Bhojgadhiya HUF and Abhijit Pawar.
According to SEBI, Rakesh Bhojgadhiya, Abhijit Pawar and Saumil Shah are having continuous and an on-going strong relationship with Mr. Bhutada even after the event of insider trading.
To protect the interest of investors and ensure market integrity, the regulator decided to take immediate action.
"Based on the discussions and factual findings on the connections, phone calls and funds transfers amongst various entities as well as transmission of UPSI from entity no. 1 to other entities… it can now be prima facie held that the entities, by pursuing a modus operandi, have carried out insider trading activities in the scrip of Magma," SEBI Whole Time Member S.K. Mohanty said in the order.
Each entity played his/ her respective part in pursuance of the said modus operandi, Mr. Mohanty said, adding that it is borne out of the facts before him that entity no.1 has also been apparently monetarily benefitted out of such insider trading allegedly indulged in by the other entities based on the UPSI transmitted by him to them.
The entities have been given 21 days time from the date of receiving the order to file their reply/objections, if any, and also indicate whether they desire to avail an opportunity of personal hearing on a date and time to be fixed on a specific request to be made in that regard, as per the order.
The regulator has given renewed thrust to its alert systems pursuant to implementation of data analytics to detect abnormal and suspicious trading pattern.
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