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| RIL gets fresh insider trading notice |
| Rajesh Bhayani / Mumbai Feb 12, 2011, 01:14 IST |
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The Securities & Exchange Board of India (Sebi) will issue Reliance Industries (RIL) a fresh showcause notice for violation of insider trading regulations.
The markets regulator has twice (November 2009, August 2010) rejected RIL's request to pay a consent fee (a settlement reached through negotiation). Sources familiar with the developments said the appeals were rejected, as the consent fee offered by the company was too low, given Sebi’s Rs 500-crore estimate of RIL’s gains from alleged insider trading.
Recently, R-ADAG Chairman Anil Ambani agreed to pay Rs 50 crore as a consent fee, subject to certain conditions, in a case pertaining to the diversion of funds of group companies to purchase shares of a sister firm.
The RIL case pertains to the 2007 dealings in shares of now-delisted subsidiary Reliance Petroleum (RPL). The regulator had launched quasi-judicial proceedings against RIL after it found violations of insider trading regulations, following an investigation into the trading pattern in RPL stock between November 1 and 29, 2007.
 RPL was merged with parent RIL in 2009 and delisted from the stock market. Sebi first issued a showcause notice to RIL in May 2009, while the initial probe had begun in early 2008.
RIL had sold 4.1 per cent equity in RPL in the open market in November 2007. However, to ensure the transaction did not hurt market sentiment, RIL first sold RPL in the futures and then the spot market while covering the shares sold in futures.
During the process, RIL generated revenues (sale consideration) of Rs 4,023 crore and its profit from the transaction in the futures segment was estimated at around Rs 500 crore.
Sebi had said that since the company was aware of the sale of equity and sold futures prior to that, it amounted to insider trading. However, the company has maintained that all rules and regulations have been complied with. RIL had also said that its action was driven by “protection” of market sentiment and that the gain was recorded in the company’s balance sheet.
When contacted today, a company spokesperson declined to comment on the issue.
Sebi’s stand was that if the sale in futures was to protect market sentiment and not to earn profit, the unintended gain should be deposited with Sebi as a settlement amount. RIL, however, is said to have offered a much lower amount. There have been offers and counter offers, but consent could not be reached.
The penalty for violation of insider trading norms is Rs 25 crore or three times the gain -- whichever is higher.
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