Sebi Fines Entity Rs 10 Lakh for Insider Trading

New Delhi, Jul 29 (PTI) Capital markets regulator Sebi on Tuesday levied a fine of Rs 10 lakh on an entity for trading in the shares of HDFC Ltd and HDFC Bank while in possession of unpublished price sensitive information (UPSI) related to their merger.

Sebi found that Rupesh Satish Dalal HUF had traded in derivatives of both HDFC entities on April 1, 2022 -- just days before the official announcement of the merger between HDFC Ltd and HDFC Bank on April 4, 2022.

Rupesh Satish Dalal is the karta of Rupesh Satish Dalal HUF.

The regulator's probe revealed that Dalal had received UPSI through his son, who was in close and regular contact with a person (individual) who was an insider associated with Deloitte.

Deloitte Touche Tohmatsu India LLP was engaged as the valuer for the merger exercise and the individual was part of the valuation team from March 29, 2022.

The individual and Dalal's son were long-time friends and exchanged several calls in the run-up to the trades. Sebi also noted that a meeting between the two took place on March 31, a day before Dalal placed the trades.

Sebi said the noticee (Rupesh Satish Dalal HUF) bought multiple call option contracts of HDFC Ltd and HDFC Bank Ltd on April 1, 2022, while being in possession of the UPSI.

The regulator noted that once the information regarding the impending merger was disclosed, Rupesh Satish Dalal HUF immediately exited his positions on the same very date, i.e., on April 4, 2022.

Thus, it is established that Rupesh Satish Dalal HUF has violated PIT (Prohibition of Insider Trading) regulations.

The order came after NSE analysed the trading activity of various entities in the scrip of HDFC Ltd and HDFC Bank Ltd. Further, the bourse observed that the trading of certain clients including Rupesh Satish Dalal HUF pointed to the possibility of trading on the basis of UPSI.

Consequently, the matter was forwarded to the Securities and Exchange Board of India (Sebi) for investigation. The period was from November 01, 2021 to April 30, 2022.

In December last year, Two individuals, including a former employee of Deloitte India, settled with capital markets regulator Sebi a case pertaining to the alleged violation of insider trading rules by paying Rs 74 lakh towards settlement fee.