Sebi settles case against Suzlon Energy through consent

Sebi disposed adjudication proceedings against Suzlon, 5 officials on payment of Rs 2,00,000 each toward settlement charges

Market regulator Securities and Exchange Board of India (Sebi) has disposed of a case against Suzlon Energy and its officials, including chairman Tulsi Tanti, for alleged violation of Prohibition of Insider Trading (PIT) Regulations through the consent route.

Sebi disposed of the adjudication proceedings against Suzlon and five of its officials on payment of Rs 2,00,000 each towards settlement charges.

The regulator had launched adjudication proceedings against Suzlon after an investigation revealed that it had unduly delayed the implementation of 'code of internal procedures and conduct for prevention of insider trading' and also failed to incorporate a mechanism for pre-clearance of trades as mandated under the PIT regulations.

The investigation regarding various price-sensitive disclosures made by Suzlon was conducted between November 2009 and December 2009.

“During the investigation it was observed that the applicant had amended its code of internal procedures and conduct for prevention of insider trading for listed companies in line with amendments in SEBI (Prohibition of Insider Trading) Regulations, 1992 notified on November 19, 2008 only on February 4, 2011, after a delay of more than 2 years,” the regulator said in an order.

The investigation revealed the delay occurred in spite of Suzlon's board of directors being aware about the changes in PIT Regulations.

“The board unduly delayed the implementation of revised Code of Conduct by deferring the matter when it was discussed in the board meetings dated May 29, 2010 and August 13, 2010 and the code was subsequently passed in the board meeting dated February 4, 2011,” Sebi said.

“As the Code of Conduct being followed by the applicant had no mechanism for pre-clearance of trades, the designated employees traded in the scrip of the applicant, allegedly in contravention of PIT
Regulation,” it added.

As per Sebi PIT regulations, every listed company has to frame its own code of conduct for its employees for dealing with its shares and price-sensitive information which is not in the public domain.  The also has to frame a pre-clearance process for dealing in company securities.

While adjudication proceedings in this case were in progress, Suzlon had submitted an application for consent order in August 2012. Under consent mechanism, akin to an out-if-court settlement, a case against alleged offender is disposed of without admission or denial of guilt on payment of a settlement fees, or temporary debarment from the market or both.

The settlement charges were paid by Suzlon directors Tulsi Tanti, Girish Tanti, Raghuraman, Ashish Dhawan and compliance officer Hemal Kanuga.

Sebi said that the consent order is “without prejudice to the right of Sebi to take enforcement actions including commencing or reopening of the proceedings pending against the applicant, if any representation made by the applicant in the consent proceedings is subsequently discovered to be untrue; or the applicant breaches any of the clauses / conditions of undertakings / waivers filed during the current consent proceedings."