SEBI FINED ADF FOODS LTD FOR LEAKING OF UNPUBLISHED PRICE SENSTIVE INFORMATION AND FOR INSIDER TRADING

SEBI FINED ADF FOODS LTD FOR LEAKING OF UNPUBLISHED PRICE SENSTIVE INFORMATION AND FOR INSIDER TRADING

INSIDER TRADING VIOLATION

The Securities and Exchange Board of India ordered impounding of alleged illegal gains worth over Rs 1.02 crore from ADF Foods Ltd.’s promoters Bhavesh Thakkar and Priyanka Thakkar and four others in an insider trading case.

BUYBACK OF EQUITY SHARES

The other four are Pallavi N Mehta, Shefali B Mehta, Navin M Mehta and Abhishek Mehta. As per the SEBI’s order, on July 27, 2016, ADF Foods informed the exchanges that the  board of directors in its meeting on the same date had approved a buyback of equity shares for an aggregate amount not exceeding Rs 18 crore.

UNPUBLISHED PRICE SENSITIVE INFORMATION OF BUYBACK

On May 21, 2016, the discussion of idea to undertake a buyback or payment of dividend was first tabled at a meeting, the SEBI said. Therefore, the market regulator considered the time period from May 21-July 27, 2016 as unpublished price sensitive information of buyback remain undisclosed.

UPSI AND WRONGFUL TRADING

The SEBI conducted a probe and found that entities had access to UPSI and traded in the scrips of the firm during the May 21-July 27, 2016 (UPSI period). The regulator further said that it prima facie found that “insider” Bhavesh Thakkar being promoter and executive director of the firm communicated UPSI to other entities whom SEBI classified as insiders as they were related to Bhavesh and hisr promoter wife Priyanka.

VIOLATED INSIDER TRADING NORMS

Priyanka, being a promoter, was involved in the fund transfer from her husband (Bhavesh Thakkar) to the other four entities and vice-versa for their trades in scrips of the firm during the UPSI period and thus prima facie violated insider trading norms, the regulator said. Regarding the other four, the SEBI noted that Navin Mehta and Abhishek Mehta, being insiders, traded in the shares of ADF Foods through the trading accounts of Pallavi Mehta and Shefali Mehta when the price sensitive information remained undisclosed in violation of insider trading regulations.

FINE OF Rs 1.02 CRORE

Accordingly, SEBI ordered to impound the alleged unlawful gains of Rs 1,02 crore (alleged gains of Rs 77 lakh with interest of Rs 25 lakh) to be paid jointly and severally.

The regulator further added that entities may file itheir replies to the watchdog within 21 days from the date of receipt of this order, if they so desire.

PENALTIES FOR INSIDER TRADING

Monetary Penalty:

Section 15G of SEBI Act, 1992 imposes penalty of at least Rs.10 lacs, which may extend to Rs.25 Crore or three times of profits made from insider trading whichever is higher.

Imprisonment:

Section 24 of SEBI Act, 1992 even goes to the extent of imprisonment upto 10 years or fine upto 25 Crore, or both, for any offences pertaining to contravention of the provisions of the Act.

NAME OF THE COMPANY	VIOLATION	ACTION TAKEN BY SEBI
Multi Commodity Exchange ( MCX) and Financial Technologies (Now, 63 Moons)	13 individuals including promoters and KMP traded in the shares of MCX and FTIL based on UPSI	Impounded 126 crore benefitted from trading Not to dispose of or alienate any of their assets till the penalty is credited to an escrow account
Piramal Enterprises Ltd	Directors did not announce the mandatory closure of trading window	Has imposed a fine of 6 lakh on them.
MAN Industries Ltd	Failure of dissemination of price sensitive information to the stock exchanges on time	Joint penalty of 25 lakh on MAN Industries, its chairman and four officials for alleged violations
Mahindra & Mahindra Ltd	Sale of shares during closure of the trading window	Imposed a fine of 2 lakh on a general manager
ITC Ltd	Failure in disclosure of sale of shares to Stock Exchanges	Has imposed a fine of 5 lakh on HR manager who failed to disclose
Satyam Computer Services Ltd	Failure to announce the mandatory closure of trading window during UPSI activity	Barred Ramalinga Raju and four others from accessing securities markets for 14 years in 2014