Sebi showcause back to haunt RIL

Amended notice asks why firm shouldn’t be barred from mkts.

The Securities and Exchange Board of India (Sebi) has asked Reliance Industries Ltd (RIL) why the company should not be barred from accessing the stock markets under rules governing fraudulent and unfair trade practices, news agencies and television channels reported today.

The amendment (dated October 8) to the original showcause notice issued in April by the regulator’s investigation department further asks why directions should not be issued to bar the company from buying, selling and dealing in any security, directly or indirectly.

When contacted, Sebi spokesperson said the regulator “will not like to confirm or deny on matters related to investigation”.

The notice was issued in the matter relating to alleged insider trading in the shares of the now-defunct Reliance Petroleum, which had since merged with RIL.

When contacted, an RIL spokesperson said the company “has always abided by all the rules and regulations of Sebi and, hence, has neither violated any provision of insider trading nor acted in any manner so as to attract provisions under Section 11(i), 11(B) and 11(4) of the Sebi Act, 1992. We have, accordingly, submitted our detailed reply to Sebi and have not received any further communication in this regard.”

The matter pertained to the sale of shares of Reliance Petroleum by the parent company in November 2007 in two instalments of 2.54 per cent and 1.47 per cent each to raise Rs 4,023 crore.

The original showcause notice had sought disgorgement of proceeds earned by RIL from transactions in Reliance Petroleum shares.

RIL had sold over 4 per cent equity in RPL in November 2007, prior to which heavy selling by various group entities was noticed in the futures contract of RPL, the original notice said, adding that the gains made through these transactions could be Rs 513 crore. In the showcause notice, Sebi has also asked RIL and its 12 associate entities why action should not be taken against them under the Sebi Act and the Prevention of Fraudulent and Unfair Practices Regulation.

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 also informed that Sebi had received complaints of insider trading by as many as 19 companies, including RPL, over the past three years.