Rupa and Company Case: Sebi penalises two entities for violating insider trading norms

Capital markets regulator Sebi has levied penalties totalling Rs 20 lakh on two entities for flouting insider trading norms in the shares of Rupa and Company Ltd (RCL).

The regulator imposed a fine of Rs 10 lakh each on Sushil Patwari (Independent Director of RCL) and Nagreeka Capital and Infrastructure Ltd (NCIL).

The order came after Sebi conducted an investigation in the scrip of RCL, to ascertain as to whether certain entities have traded in the company during February-June 2021, while in the possession of unpublished price sensitive information (UPSI).

The unpublished price sensitive information related to the announcement of financial results for the quarter and year ended March 2021. The period of UPSI was May 1-31, 2021.

In its 28-page order on Friday, Sebi said Sushil Patwari has been a member on the audit committee of Rupa and Company since June 2004, and the same was confirmed by NCIL, Rupa as well as the annual report for financial year 2020-21 of the RCL.

Therefore, it is quite evident that Sushil Patwari was an insider and connected to Rupa, it added.

The regulator also noted that RCL's manager - finance, had shared the financial and related papers with Rupa's whole-time directors and independent directors, including Sushil Patwari.

Also, the regulator observed that the UPSI was passed on to NCIL by Patwari, who was the chairman in executive capacity of NCIL and had reasonable influence on the trading decisions of the firm.

Thereafter, NCIL during the UPSI period bought shares of the Rupa, one day prior to disclosure of financials results by RCL and the same were subsequently sold on the very next day after disclosure of the UPSI, Sebi said in the order.

The amount of disproportionate gain or unfair advantage by NCIL while trading in the shares of Rupa was to the tune of Rs 2.37 lakh.

The insider trading rules prohibits the trading in the shares of the company by the insiders while in possession of UPSI, the order said.

Through such acts, Sushil Patwari violated the Prohibition of Insider Trading (PIT) rules by communicating the UPSI to Nagreeka and NCIL has flouted the norms by trading while in possession of UPSI, Sebi said.

Meanwhile, in four separate orders on Friday, the capital markets watchdog-imposed fines totalling Rs 20 lakh on four entities for indulging in non-genuine trades in the illiquid stock options segment on BSE.

Individually, Sebi slapped a fine of Rs 5 lakh each on Marsh Vinimay, Sudha Somani, Paramdham Vinimay and Nareshbhai Gordhanbhai Panchal.