The regulator Securities and Exchange Board of India (SEBI) has barred Abhay Bhutada, Managing Director of Adar Poonawalla-owned Poonawalla Fincorp’s from the securities market for alleged insider trading.
Along with Bhatuda, seven others have been barred and Sebi has impounded an amount of Rs 13.58 crore for wrongful gains.
In a 46-page interim order, SEBI said the eight entities had made total wrongful gains of Rs 13.58 crore through insider trading in shares of Magma Fincorp (now Poonawalla Fincorp) around the time it was acquired by Rising Sun Holdings (RSHPL).
What is the case about
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In the 36-page interim order, Sebi said Bhutada who had access to the UPSI (Unpublished Price Sensitive Information) seemingly engaged and indulged in such fraudulent activities by way of transmitting the UPSI to multiple connected entities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.
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 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 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, 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.
(With PTI inputs)