Mumbai: India’s stock market regulator, Securities and Exchange Board of India, or Sebi, on Tuesday barred software company Polaris Financial Technology Ltd’s chairman and managing director Arun Jain from market activities on charges of insider trading for a period of two years.
The incident dates back to 2000.
“I find that the noticee being insider dealt in 15,080 shares of the company on behalf of PHPL (Polaris Holding Pvt. Ltd) on the basis of ‘unpublished price sensitive information’ held by him. Thus, he contravened provisions of regulation 3 of the PIT (prohibition of insider trading) Regulations,” Sebi whole time member Rajeev Kumar Agarwal said in an order.
“I’m disappointed but we need to respect Sebi. I will take legal opinion and appeal against the order,” Jain said. “In the last 13 years I have not done any insider trading.”
An individual barred from market activities for two years cannot take positions on shares or trade under their own accounts.
Sebi started investigating the matter following media reports that Polaris, which had called off its plan to acquire US-based Data Inc., informed the stock exchanges after a delay. During that period, Sebi noted that a Chennai-based broking firm dealt in Polaris shares on behalf of Polaris Holding.
“During the relevant time, PHPL, holding of 36% in the company, was one of the promoters of the company. Arun Jain was one of the promoters/ directors and chairman-cum-managing Director of the company,” the order said.
Agarwal noted in his order that there was a decline in the shares of the company after the information was disclosed to stock exchanges on 30 September, 2000. The order said the shares dropped from Rs595 on 29 September, 2000, to a low of Rs390 on 23 October, 2000.
“I find that had this information been brought in the public domain earlier, it would certainly have impacted the price of the scrip. Therefore, the fact that the proposed acquisition was not in the interest of the shareholders of the company and it was not likely to be completed by August 23, 2000 and was to be called off was clearly an ‘unpublished price sensitive information’,” the order noted.
“The noticee had admitted during investigation that he had instructed his chartered accountant to sell around 15,000 shares of the company for the purpose of purchasing a plot in Gurgaon in Haryana. I note that PHPL, wherein the noticee was director during the relevant time, sold 15,080 shares of the company through Allsec at an average price of Rs700 per share in settlement,” it added.
Sebi’s annoucement came after market hours. Polaris shares rose 1.82% to close at Rs134 on BSE Ltd while the benchmark Sensex rose 0.45% to close at 18793.36 points on Tuesday. Since the beginning of the year, Polaris has gained 8.24% against the Sensex’s 21.6% rise.