Because we are different.

Sebi names RIL insider traders

4 January 2013

statesman news service

MUMBAI, 4 JAN: In oblique compliance with the directive of chief information commissioner Mr Satyananda Mishra, the stock market regulator Securities and Exchange Board of India (Sebi) finally disclosed the name of  149 entities/individuals ~ including 12 companies believed to be closely associated with Reliance Industries Limited ~ found prima facie involved in the insider trading in Reliance Petroleum stocks in 2007 when the subsidiary was about to merge into the flagship RIL.

The disclosure came as a setback to RIL's efforts to settle the matter through the consent process which in the trade parlance means paying fees to seek quashing of investigation. Once Sebi approves a consent plea, the company under investigation need not admit or reject charges of insider trading as the matter closes for good.

The bid to get proceedings dropped started in 2007. RIL and these entities/individuals have separately offered to settle the matter by paying penalty for their wrongdoings. The market regulator has rejected all requests between 26 May and 31 December 2012. The consent proceedings appear to have reached a dead-end because the penalty offered by RIl to settle the matter ~ Rs 2 crore initially, subsequently raised to Rs 10 crore ~ was too paltry considering the enormity of alleged insider trading fraud. RIL's consent plea has been rejected thrice so far.

When the merger of RPL into RIL was on the anvil, a host of entities short-sold Reliance Petroleum shares. The alleged insider trading related to selling of borrowed RPL stocks with a plan to buy them back at lower prices later. In 2007, RIL sold 4.1 per cent of its stake in RPL but to prevent fall in the price of the stock, the shares were first sold in the futures market and later in the spot market, thus covering them comfortably in the futures market. This was accompanied by a huge build-up of “open interest” outstanding positions in RPL shares by  the traders (these entities/individuals) in the futures and options market.

Sebi in an interim order said because the company was aware of the sale of equity shares and sold futures ahead of that, its action amounted to insider trading.

From the 4.1 per cent shares sale, RIL accrued Rs 4,023 crore revenue while the total profit from futures transactions was Rs 513 crore.

Sebi stepped in to probe the suspected insider trading when on 1 November 2007, RPL stock

surged to an all time intra-day high of Rs 295. The market regulator also noticed a parallel build-up of positions in futures. RIL first denied charges of fraud and insider trading in the shares of its own subsidiary. As the investigation progressed, consent pleas were submitted to SEBI not only by RIL but other big and small ~ but all obscure ~ entities.

Sebi was reluctant to disclose the names of those under investigation in tha name of maintaining confidentiality. A Bangalore lawyer, Mr Arun Kumar Agrawal's application seeking names of the 149 entities was turned down by Sebi. He moved the country's chief information commissioner, who in November 2012 directed Sebi to identify the players involved in alleged insider trading. The compliance came late last evening when the market regulator quietly posted the list on its website. One of the consent pleas was filed by RIL senior executive Manoj Modi, believed to be close to chairman Mukesh D Ambani. Other entities under investigation are Reliance Ports and Terminals, LPG Infrastructures (India), Vinamra Universal Traders, Gujarat Petcoke and Petroproduct Supply, Relogistics (Rajasthan), Relogistic (India), Relpol Plastic Products, Darshan Securities, Fine Tech Commercials, Dharti Investment and Holdings, Arthik Commercials and Mo Tech.