SEBI Passes Settlement Order Against Four Entities Alleged in Insider Trading in Poonawalla Fincorp

SEBI Passes Settlement Order Against Four Entities Alleged in Insider Trading in Poonawalla Fincorp

The Securities Exchange Board of India (SEBI) passed settlement order against four entities, case pertaining to alleged insider trading in the shares of Poonawalla Fincorp Ltd, earlier known as Magma Fincorp Ltd, after the entities paid Rs 10.97 crores towards the settlement fee.

The entities paid a total of Rs 10.97 crores- Rakesh Bhojgdhiya HUF (Rs. 4.29 crores), Rakesh Bhojgdhiya (Rs. 3.74 crores), Murlidhar Agrawal (Rs. 1.20 crores) and Amit Agrawal (Rs. 1.72 crores)- towards the settlement charges.

The factual matrix of the case is that SEBI had carried out an investigation in the scrip of Magma for the period January 2021 to February 2021 and prima facie found that the applicants were insiders and were aware of the unpublished price-sensitive information (UPSI) regarding Poonawalla Group's interest to invest in Magma, and on the basis of the same the applicants traded in the scrip of Magma and made gains.

The regulator, in its show cause notice issued, alleged violations of insider trading norms by Bhojgdhiya, Bhojgdhiya HUF and Agrawals.

On 10th February, 2021, Poonawalla Fincorp made a corporate announcement through the stock exchanges, regarding the acquisition of a controlling stake by Rising Sun Holdings Private Ltd, a Poonawalla Group entity, in Magma and the raising of fresh capital of Rs. 3,456 crores by Magma through a preferential allotment.

In respect of the corporate announcement, the capital market watchdog received an alert pointing to insider trading by certain entities in the scrip of Magma in February 2021.

After an analysis of the alert, SEBI passed an ex-parte interim order on 15th September, 2021, thereby restraining the entities from buying, selling or dealing in securities and their bank accounts was impounded to the extent of alleged illegal gains.

Subsequently, these directions were confirmed through a confirmatory order passed by SEBI in March 2022, subject to certain modifications.

Thereafter, the Applicants had filed for a settlement application requesting for the settlement of the specified proceedings initiated vide the Show-Cause-Notice (SCN) under the SEBI (Settlement Proceedings) Regulations, 2018 (“Settlement Regulations”).

Pursuant to receipt of the Settlement Applications, the authorized representatives of the Applicants had a meeting with the Internal Committee of SEBI, wherein the issues detailed above were deliberated. Thereafter, the Applicants proposed revised settlement terms by way of their letters to settle the specified proceedings initiated by way of the SCN against them.

The High-Powered Advisory Committee in its meeting considered the revised settlement terms proposed by the Applicants and recommended the case for settlement upon total payment amounting to Rs 10.97 crores to be paid by the four entities.

Apart from these, the terms of the settlement also included disgorgement of the already impounded ill-gotten gains of a combined value of Rs 11.82 crore made by these entities.

Accordingly, the SEBI ruled that in view of the acceptance of the settlement terms and receipt of settlement amounts, the specified proceedings initiated against the applicants vide show cause notices were disposed of in terms of Section 15JB read with Section 19 of the SEBI Act and Regulation 23(1) of the Settlement Regulations on the basis of the settlement terms.