Sebi disposes of insider trading matter against Axis Bank

In 2011, Axis Bank was acting as merchant banker for open offers in KSK Energy Venture, Bombay Rayons Fashion

Securities and Exchange Board of India (Sebi) has disposed of the case against Axis Bank that had alleged the lender of violating various norms, including those related to insider trading as well as regulations for merchant bankers.     

The matter relates to a period in 2011 when Axis Bank was acting as a merchant banker for the open offers in KSK Energy Venture and Bombay Rayons Fashion.     

Sebi had alleged that the bank traded in shares of the two companies, while in possession of the information relating to the proposed open offer, which was unpublished price sensitive information, hence violating norms on Prohibition of Insider Trading (PIT) and Merchant Banker Regulations.

However, in an order dated March 28, Sebi said “benefit of doubt can be given to the noticee (Axis Bank) in respect of the charges under PIT Regulations and Merchant Banker Regulations as mentioned in the Show Cause Notice”.     

The regulator concluded that it did do not find this "to be a fit case to impose penalty on the noticee, Axis Bank Ltd. The matter is accordingly disposed off".     

Axis Bank had been alleged of violating insider trading norms as per which a firm is prohibited from dealing in the securities of another company or its associate while in possession of unpublished price sensitive information.     

Besides, a merchant banker or any of its employees cannot enter into any transaction in securities of bodies corporate on the basis of unpublished price sensitive information.     

Sebi said that "in the absence of any evidence to show that the systems put in place by the noticee (Axis) were breached...The noticee can be given the benefit of doubt as regards the allegation of violation" of the provisions of PIT Regulations and Merchant Banker norms.     

Additionally, Sebi had also alleged that the bank broke norms pertaining to Substantial Acquisition of Shares and Takeovers (SAST). As per SAST rules ,a merchant banker cannot deal in the shares of the target company during the period commencing from the date of his appointment till the expiry of the 15 days from the date of closure of the offer.     However Sebi observed that these charges were "not established".