Sebi imposes fine of Rs 6 lakh on Piramal Enterprises over insider-trading

The regulator finds that entities failed to handle the price-sensitive information related to sale of its domestic health care business to Abbott

The Securities and Exchange Board of India (Sebi) on Monday penalised Piramal Enterprises, its Chairman Ajay G Piramal, Vice-Chairperson Swati A Piramal and three others for failing to handle the price-sensitive information related to the sale of its domestic health care business to Abbott. The regulator imposed a fine of Rs 6 lakh on all the five for violating insider-trading rules.

Sebi during its probe found that entities failed to handle the Unpublished Price Sensitive Information of the above transaction on a "need to know" basis as Anand Piramal, who was neither an employee nor a director, was privy to the decision at every stage and thus violated the said norms.

According to Sebi guidelines, price sensitive information of the company is to be handled on a "need to know" basis; this means the information should be disclosed only to those within the company who need the information to discharge their duty and whose possession of such information will not give rise to a conflict of interest or apprehension of misuse of the information. All non-public information directly received by any employee should immediately be reported to the head of the department.

Besides, it was also alleged that the entities failed to implement the model code of conduct by not announcing the closure of the trading window during the time the price-sensitive information was unpublished and open the same only 24 hours after the said information was made public, the Sebi order said.

It is further alleged that the entities failed to comply with the provisions of listing agreement by not placing the material information with respect to sale of the health care business before the board of Piramal Enterprises during the process of decision making, Sebi noted.

"This issue pertains to a procedural provision with no gains to the promoter family or the management. Once we receive the order from Sebi, we will evaluate our options," Piramal Enterprises said in a statement.