SEBI imposes fine on ICICI Bank and its compliance officer for lapse in disclosure

Market regulator Securities and Exchange Board of India (SEBI) imposed a fine of Rs.12 lakhs on ICICI Bank and its compliance officer Sandeep Batra for failure to disclose information in a timely manner regarding signing of binding agreement with Bank of Rajasthan.

During an investigation, SEBI found that ICICI bank had signed a “binding implementation agreement” with Bank of Rajasthan on May 18, 2010, to get the support of the bank’s shareholders in order to effect a proposal of its amalgamation with the private lender.

According to SEBI, the binding agreement was a crucial step to effect the amalgamation of Bank of Rajasthan with ICICI Bank. It also contained clauses regarding the swap ratio of shares and the draft scheme of amalgamation among other information. SEBI added that all the details related to the amalgamation, mergers or takeovers of a listed company are deemed to be price-sensitive information and in this case, the signing of the binding agreement is price-sensitive information which was supposed to be disclosed to the stock exchanges “on an immediate basis”.

SEBI held that the agreement between ICICI and Bank of Rajasthan was signed at around 04:30 am. However, ICICI Bank made the disclosure to the exchanges at 08:10 pm. This meant a delay of nearly one trading day. According to SEBI, by withholding such disclosure for one full trading day, ICICI created a situation of information asymmetry wherein the general public was not aware of any such agreement.

SEBI added that, by doing so, the lender has violated listing agreement norms as well as provisions of Prohibition of Insider Trading regulations. Moreover, Sandeep Batra, being the compliance officer of ICICI Bank and also being aware of the developments regarding the signing of the binding agreement, failed to ensure that ICICI Bank complies with the requirements of making immediate and continuous disclosures regarding binding agreement to the stock exchanges.

Consequently, a total fine of Rs.10 lakh has been imposed on ICICI Bank while Sandeep Batra has been fined Rs. 2 lakh.