Insider trading: Sebi puts RIL on notice

12 group firms are accused of having sold heavily prior to RIL offloading 4% RPL stake in Nov 2007.

Market regulator Securities and Exchange Board of India (Sebi) is believed to have issued a show-cause notice to Reliance Industries (RIL) and its associate entities following a probe into charges of insider trading in securities of group firm Reliance Petroleum (RPL).

While a company spokesperson did not comment on queries related to the notice, sources said Sebi had begun the probe in early 2008 after the issue was raised in Parliament.

RIL had sold over 4 per cent equity in RPL in November 2007, prior to which heavy selling, said to be by various group entities, was noticed in the futures contract of RPL.

Sources said the gains made through these transactions could be over Rs 500 crore, but no confirmation could be obtained from Sebi.
 

CASE DIARY

* RIL starts selling RPL shares in the cash market in November 6, 2007, and offloads 4.01 per cent of its RPL holding

* RIL’s holding in RPL comes down to 70.99 per cent from 75 per cent after the stake sale

* The stake sale fuels speculation that Chevron Corporation, one of the world’s largest global energy companies, may pull out of RPL by selling its 5 per cent stake to RIL

* Samajwadi Party leader and Rajya Sabha MP Amar Singh sends several letters to the then finance minister, P Chidambaram, and Sebi, alleging huge insider trading by the Mukesh Ambani-controlled entities

* Singh claims insiders have pocketed over Rs 1,000 crore by trading in RPL shares

* On March 19 this year, Minister of State for Finance Pawan Kumar Bansal informs the Rajya Sabha about the Sebi inquiry into the matter

In the show-cause notice, Sebi is understood to have asked RIL and its 12 associate entities, which are said to have sold in the futures market, why action should not be taken against them under the Sebi Act and the Prevention of Fraudulent and Unfair Practices Regulation.

When contacted, Sebi’s investigation department officials did not comment, saying they were not authorised to speak to the media. The Sebi spokesperson could not be contacted.

Earlier in February 2009, the government had informed Parliament, in reply to queries raised over charges of insider trading in shares of RPL, that Sebi was investigating the matter. Parliament was informed that Sebi had received complaints of insider trading by as many as 19 companies, including RPL, over the past three years.

Earlier this year, the boards of RIL and RPL, as also their shareholders, had approved a proposal to merge the latter with the parent company in an all-share transaction.