July 02, 2019

SEBI Imposes Rs 1.25-Crore Fine On Former Multi-Commodity Exchange Director For Insider Trading Misusing Privileged Info

[ By Bobby Anthony ]


Former Multi Commodity Exchange (MCX) of India Ltd director Hariharan Vaidyalingam has been fined Rs 1.25 crore by the Securities and Exchange Board of India (SEBI) for insider trading.

A SEBI order dated June 28 also stated that it has been established that Hariharan being an insider sold MCX when in possession of Unpublished Price Sensitive Information (UPSI) and violated provisions of SEBI (Prohibition of Insider Trading) Regulations.

The SEBI order stated that Hariharan was an insider in possession of UPSI as implied by the show cause notice dated April 27, 2012 issued by the Department of company Affairs to the National Spot Exchange Limited (NSEL).

It stated that he had traded on the basis of that unpublished price sensitive information and thereby violated SEBI Prohibition of Insider Trading norms.

According to the SEBI order, Hariharan was a non-executive non-independent director on the MCX board during April 2002 to June 2012 and worked as an employee of MCX promoted Financial Technologies India Limited (FTIL) from January 2001 to June 2011.

Besides, Hairharan was also a non-executive non-independent director of the National Spot Exchange Limited (NSEL) from 2005 to December 2011, the order stated.

Not only was MCX the promoter of FTIL, but significantly, the latter also held a 99.9% stake in NSEL, the SEBI order stated.

It may be recalled that Department of Company Affairs (DCA) had sent a showcause notice (SCN) to the NSEL dated April 27, 2012 whereby it had found fault with certain types of contracts which had traded on NSEL.

According to SEBI, the Unpublished Price Sensitive Information (UPSI) came into existence on April 27, 2012, after the Department of company Affairs issued its notice to National Spot Exchange Limited (NSEL).

The SEB I order stated that the unpublished price sensitive information ceased to exist when NSEL suspended trading in all contracts and deferred settlement of all pending contracts on July 31, 2013.

After a probe, SEBI found that Hariharan who was an “insider” with access to unpublished price sensitive information had sold 5,41,482 MCX shares during the UPSI period.

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