Sebi Bans Six Entities From Securities Markets For Violating Insider Trading Norms

The entities are, Dinesh Gupta, Dinesh Gupta HUF, Rajesh Gupta, Rajesh Gupta HUF, Nirmala Gupta and Ajay Fincap Consultants, and they are collectively referred to as Noticees

The Sebi found that the insider trading was carried out by the noticees on multiple days and further large amounts of losses have been avoided unlawfully by them.

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The Sebi on Monday barred six entities from securities markets for one year and levied penalties totalling Rs 70 lakh on them for flouting insider trading norms in the matter of Shilpi Cable Technologies. The regulator also directed the entities to disgorge the number of unlawful gains of Rs 27.59 crore along with the interest of 9 per cent per annum from May 2017 till the actual date of payment.

The entities are, Dinesh Gupta, Dinesh Gupta HUF, Rajesh Gupta, Rajesh Gupta HUF, Nirmala Gupta and Ajay Fincap Consultants, and they are collectively referred to as Noticees.

The present proceeding emanates from a show cause notice issued in March 2022, arising out of an investigation conducted by Sebi into the trading in the scrip of Shilpi Cable Technologies Ltd (SCTL) from March to May 2017.

The investigation was undertaken by Sebi to ascertain whether certain entities have traded in the scrip of the SCTL based on unpublished price sensitive information (UPSI) in contravention of Prohibition of Insider Trading (PIT) rules.

The UPSI relates to a demand notice dated March 08, 2017, issued on behalf of the petitioner, Macquarie Bank Ltd, seeking payment of $3.01 million (equivalent to approximately Rs 19.55 crore). The said demand notice was received by the SCTL on March 10, 2017.

The said trading took place from March 10, 2017, to April 30, 2017.

In its final order, Sebi found that the insider trading was carried out by the noticees on multiple days and further large amounts of losses have been avoided unlawfully by them.

Therefore, the trades executed by the Noticees in the scrip of SCTL during the UPSI period were in violation of PIT regulations.

Sebi noted that Dinesh Gupta, Dinesh Gupta HUF and Rajesh Gupta had frequent communication with the promoters-directors of SCTL, which makes a compelling case for making the Noticees fall under the definition of connected persons and insiders under PIT rules.

The regulator also found Nirmala Gupta is a relative of Dinesh and Rajesh, which also qualifies her to be a connected person as all the trades in her account were done by her relatives who were the insider in SCTL.

Further, Dinesh Gupta HUF is a HUF of Dinesh Gupta who has been held as an insider. Therefore, the trades executed by such a HUF would also fall in the realm of insider trading, the regulator said.

Also, Rajesh Gupta HUF is the major shareholder of Ajay Fincap Consultants, which also makes it an insider of SCTL, it added.

Accordingly, Sebi slapped a fine of Rs 15 lakh each on Dinesh Gupta, Dinesh Gupta HUF, and Rajesh Gupta, Rs 10 lakh on Nirmala Gupta and Ajay Fincap Consultants and Rs 5 lakh on Rajesh Gupta HUF.

In a separate order, Sebi imposed a fine of Rs 5 lakh on Orix Corporation for violating Mutual Fund regulations.