Sebi, ED to probe insider trading

Sebi, ED to probe insider trading

Investigation will look into money laundering angle

Sebi, ED  to probe  insider trading

Alongside Sebi probe, Enforcement Directorate (ED) will launch a probe into the housing loan scam to check money laundering as the CBI registered cases against top officials of banks and financial firms under various sections, which fall under scheduled offence of the Directorate. 

“The ED will move in as corruption falls under the schedule offence under the prevention of money laundering act (PMLA). However, the Directorate will not immediately step into the probe,” a source at ED said. However, sources rule out any immediate investigation into the case that saw arrest of top officials on charges of taking bribes for granting loans to corporates.

Meanwhile, the initial findings of the market regulator, when corroborated with the charges made by the CBI, indicate towards a lage-scale front-running deals or shares being purchased or sold in these companies — some of them blue chip firms — on the basis of prior knowledge about investment decisions being made by large institutional investors, said a top Sebi official.

These large institutional investors could also be LIC, whose Secretary (Investments) figures among those arrested by CBI in connection with the multi-crore scam, apart from those investors who participated in share or debt placements arranged by investment banking and financial services firm Money Matters, pointed out reliable sources. As such, the probe would encompass large dealings and any irregular spurt in volumes or prices of shares of all the companies where these institutional investors had bought or sold shares over the past two years, said sources.

The top officials of Money Matters, a fast growing entity that boasts of having served a number of top-level corporate entities in the past including the likes of Tatas, Ambanis and Birlas, have emerged as the focal points of the scam.

Sources said that though the arrested official of the country’s largest insurer LIC could have been used (by Money Matters) in terms of revealing the investment decisions already taken by the PSU, he may not have been in a position to know upcoming decisions by the company or influence its investments in stocks. Since LIC is not a listed company and is not obliged to disclose its purchase or sale of shares on day-to-day basis, the names of companies where it has invested or whose shares it has sold generally come to be known with a time-lag.

Besides front-running, the regulator is also looking into possibility of insider trading by the top officials, and in some cases, promoters of the companies whose names have surfaced in the CBI probe. Considering the sensitivity of the matter and the probe still in preliminary stages, the officials were not forthcoming in terms of disclosing the names of the companies.  For one thing, the companies whose shares have been manipulated may not be themselves at fault.

Sebi official pointed out that it (the regulator) had begun probing for insider trading possibilities in many of these companies, even prior to the arrests made by CBI two days ago,as it feared irregularities in their share dealings over the past few months.

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