SEBI Disposes Of Alleged Insider Trading Case Against Factorial Master Fund In The Scrip Of L&T Finance Holdings

Insider trading charges against Cayman Islands-based Factorial Master Fund, in the scrip of L&T Finance Holdings, has been dropped by the Securities & Exchange Board of India (SEBI).

The order was passed after the SEBI probed the matter.

Earlier, it had observed that Factorial had allegedly indulged in unusual and aggressive trading for the period between March 10, 2014, and March 14, 2019, in the scrip of L&T Finance, merely a day before the offer-for-sale announcement.

This was done when Factorial was in the possession of unpublished price-sensitive information (UPSI) due to which it allegedly made a profit of over Rs 20 crore.

However, SEBI took into account the possibility that Factorial had aggressively traded in the scrip of L&T Finance not on the basis of unpublished information but on the basis of “calculated risk”.

Factorial could have known that L&T had begun selling of shares in November-December 2013 and would sell the balance shares after the expiry of cooling-off period, that is, on or after March 17, 2014, the SEBI concluded.

It was well known that L&T, which held more than 82% shares in L&T Finance, was required to bring down its stake to 75%, in accordance with relevant market norms, by August 2014.

Accordingly, L&T had disposed of 1% of its shareholding in L&T Finance during November-December 2013 through market sale and was entitled to sell balance shares after the expiry of the 12-week cooling-off period, due on March 17, 2014.

Therefore, Factorial had every reason to believe that the shares of L&T Finance Holdings would be sold at a deep discount on or after March 17, 2014, the SEBI concluded.