In a crucial order passed in the Magma Fincorp insider trading case, market regulator SEBI has restrained eight individuals from buying, selling or dealing in securities. They have been ordered to square off/close any open position in any exchange-traded derivative contracts within three months.
These individuals; named in SEBI’s order that includes Abhay Bhutada, managing director at Poonawalla Fincorp; have been jointly made liable for an amount of over Rs 13.5 crore.
The market regulator, in its order, has said that it started a preliminary examination after it received system generated insider trading alerts in the scrip of Magma Fincorp for the month of February 2021, which was around the same time when the corporate announcement was made regarding acquisition of controlling stake in the company by Rising Sun Holding Private Limited, a company controlled by Poonawalla Group.
SEBI, in its examination, observed that Bhutada, who was working as managing director and CEO of Poonawalla Finance and would go on to become the managing director of the target company emerging as a result of the acquisition deal, was in possession of the material non-public price sensitive information with respect to the acquisition of controlling stake in Magma by Rising Sun Holding Private Limited.
SEBI found that Bhutada (Insider) was connected to other individuals named in the order-- Saumil Shah, Rakesh Rajendra Bhojgadhiya, and Abhijit Pawar.
Based on the analysis of CDRs and bank statements, the regulator observed that Bhojgadhiya was connected to Amit Agarwal. Also, Saumil Shah had family and financial relationship with Surabhi Kishore Shah and Amit Agrawal had family and financial relationship with Murlidhar Bagranglal Agrawal. SEBI also found that there were phone calls among the above people during the relevant period and the said phone calls were followed by transfer of funds.
Further, it was also found that persons enjoying connection through phone calls, fund transfers, traded in the scrip of Magma in advance of the mentioned event which was the disclosure of the corporate announcement.
Based on its findings, SEBI along with restraining the eight individuals from buying, selling or dealing in securities, has also made Bhutada, Bhojgadhiyan, Rakesh Rajendra Bhojgadhiya HUF and Abhijit Pawar jointly liable for Rs 8.3 crore. SEBI has also made Amit Agrawal, Murlidhar Bagranglal Agrawal and Bhojgadhiya jointly liable for Rs 3.5 crore and made Saumil Shah and Surabhi Kishore Shah together liable for Rs 1.76 crore.
The entities will have to open an escrow account and deposit the ordered amount within 15 days of the order.