Tribunal upholds Sebi penalty against Prudential Stock

Sebi took action against the company after finding it had 19.70% stake of Gennex Laboratories in May 2006 without making mandatory disclosures

The Securities Appellate Tribunal today upheld market regulator Sebi's order imposing Rs 17 lakh penalty on investment firm Prudential Stock & Securities for violating the takeover and insider trading norms.

The tribunal has also declined a plea to take a lenient view and lower the penalty on the company, which had said that the said violations did not impact the market and interest of shareholders.

"We are not convinced with this argument either. While deciding the quantum of penalty, the adjudicating officer (of Sebi) has given due consideration to the factors and has imposed penalty within the limits prescribed under the relevant sections which prescribe penalty," SAT said.

The Tribunal also observed that Prudential Stock & Securities, which invests in securities of listed and unlisted companies, was not been cooperative, as it neither submitted a proper reply to the show cause notice nor did it respond to the summons issued by Sebi.

"In the facts and circumstances of the case, no interference is called for even on the quantum of penalty imposed by the adjudicating officer," SAT order said.

Sebi had taken action against the company, through an order passed in October 2011, after its probe found that it had got 20 lakh shares or 19.70% stake of Gennex Laboratories in May 2006 without making mandatory disclosures under the takeover regulations.

According to Sebi, Prudential Stock had got these shares from Global Telenet Ltd in an off-market transaction and later it sold 9,336 shares on June 7, 2006 and another 20,02,700 shares on June 14, 2006 to Mercury Fund Management.

Sebi probe, which found Prudential Stock to have violated insider trading regulations as well, was initiated after a significant change was noticed in promoter holding of Gennex Lab from 53.62% to 24.72% between April 2007 to December 2007.