Manappuram Finance: Sebi disposes of insider trading charges against SBI MF, Aditya Birla Sunlife MF

Markets regulator Sebi on Monday disposed of insider trading charges against two mutual fund houses - SBI Funds Management and Aditya Birla Sunlife AMC - in the matter of Manappuram Finance.

It was alleged that the two fund houses had sold shares of Manappuram Finance Ltd (MFL) while in possession of unpublished price sensitive information (UPSI) about the company and thereby violated insider trading norms.

Sebi, pursuant to investigation in the matter of selective disclosure of unpublished price sensitive information by MFL, observed that the two fund houses had sold its shares while allegedly in possession of UPSI during March 1-20, 2013 and allegedly violated PIT (Prohibition of Insider Trading) Regulations.

Sebi noted that officials of MFL met Ambit Capital Pvt Ltd's research analysts on March 18, 2013 to seek market guidance about the quarterly results and future outlook.

Ambit published a research report based on the meeting which was distributed to its clients (broking as well as research) on March 19, 2013 before the market opening hours.

In the research report, Ambit had changed its rating of MFL's stock from "buy" to "under review."

Ambit published the report based on the meeting which was distributed to its clients (broking as well as research) on March 19, 2013 before the market opening hours.

The information of negative profit for the fourth quarter of FY2012-13, which is deemed to be price sensitive information, was disclosed to the stock exchanges by MFL on March 20, 2013 after market hours and the information was already in the public domain before that.

Sebi said the asset management companies (AMCs) were not in a position to know that the information that was distributed in the research report or discussed in the conference call or being covered by media is UPSI.

The transactions of the asset management companies was purely from the point of view of the unit holders in the mutual fund and selling of the scrip of MFL during that time was necessary to avoid significant loss to the unit holders in the scheme, since the price of the scrip was rapidly falling after the research report was issued in the morning of March 19, 2013, it added.

"I do not find a reasonable and acceptable degree of probability towards proving beyond doubt or even, without existence of significant doubt that Noticee (the two fund houses) had traded in the scrip of MFL when in possession of UPSI and hence, the allegation of violation of...PIT Regulations...does not stand established," Sebi Adjudicating Officer Vijayant Kumar Verma said in similarly worded separate orders.

"I hereby dispose of the SCN (show cause notice) in the matter without any penalty," he added.

Last month, Sebi had disposed of insider trading allegations against IDFC Asset Management Company and BNP Paribas Asset Management in the same matter.