Markets regulator Sebi on Thursday disposed of proceedings against four entities including Bharti Telecom Ltd and Sunil Bharti Mittal, in a matter related to alleged violation of insider trading norms while dealing in Bharti Airtel's scrip.
The order follows an investigation conducted by Sebi in respect of trading of certain entities in the scrip of Bharti Airtel Ltd to ascertain alleged violation of the Prohibition of Insider Trading (PIT) norms.
During the period of investigation, Sunil Bharti Mittal was chairman of Bharti Airtel, Gopal Vittal was its director, Rohit Krishan Pal was the compliance officer and Bharti Telecom was the promoter.
On October 2017, Bharti Airtel in a regulatory filing announced the proposed acquisition of the consumer mobile business of Tata Teleservices Ltd and Tata Teleservices Maharashtra Ltd.
The information pertained to the acquisition was alleged to be an unpublished price-sensitive information (UPSI).
It was alleged that a transaction took place between Bharti Telecom and Gopal Vittal during the UPSI period as Vittal had sold 1.21 lakh shares of the company to Bharti Telecom on August 10, 2017 by way of a block deal.
As per the code of conduct of the firm, a pre-clearance of trades was needed from the compliance officer since the number of shares involved in the trade exceeded 50,000 scrips, to be approved in consultation with the company's chairman.
The showcause notice levelled allegation that the compliance officer, Rohit Krishan Puri, and Bharti Airtel Chairman Sunil Bharti Mittal, by giving pre-clearance to trades to Vittal during the UPSI period violated the provisions of code of conduct under PIT regulations.
However, Sebi concluded that the information regarding the proposed acquisition was a publicly available information and the same cannot be treated as UPSI.
The information had actually become public first on July 7, 2017, and thereafter it continued to remain in circulation in public domain. Further, the application for pre-clearance of the trade was made on August 7, 2017, which was well after the UPSI period i.e. June 3, 2017, to July 7, 2017.
"The trade done by the Noticees 1 and 2 on August 10, 2017, do not fall under the UPSI period," Sebi said.
Noticee 1 and 2 refer to Gopal Vittal and Bharti Telecom, respectively.
Vittal, being in possession of UPSI, which is a positive development, should have been holding the shares and sell the same subsequent to publication of the said information. However, he sold the share much before the alleged UPSI was made public by the company, Sebi said.
It added that therefore, the trading pattern of Gopal Vittal at the time of selling of shares to Bharti Telecom does not confirm with the UPSI, as he does not seem to have made any kind of profit or avoided any loss out of the sale of shares.
The continuous acquisition of shares of Bharti Airtel by Bharti Telecom in the past three years and no corresponding sale of shares subsequent to the publication of the price-sensitive information, do not fit in the trading pattern of an entity that would try to gain benefit out of an UPSI, it added.
Regarding Rohit Krishan Puri, Sebi noted that the pre-clearance was sought from him by Vittal along with the declaration that he was not in possession of UPSI.
As an additional measure of caution, Puri also discussed the same with Sunil Bharti Mittal before granting pre-clearance.
Sebi noted that "enough precautions" had been taken by him.
"Further, it is seen that no responsibility is mentioned of the chairman of a company under...model code of conduct. Therefore, Noticee 4 cannot be held liable for the violation ... of model code of conduct," Sebi said regarding Sunil Bharti Mittal.
Therefore, Sebi disposed of the charges leveled against Bharti Telecom, Sunil Bharti Mittal, Gopal Vittal and Rohit Krishan Puri.
