Sebi probes six IndusInd Bank officials over insider trading claims: Report

India's market regulator Sebi is investigating six IndusInd Bank officials for allegedly selling stock options while aware of undisclosed accounting discrepancies

The Securities and Exchange Board of India (Sebi) is looking into whether six officials at IndusInd Bank engaged in insider trading by selling stock options while being aware of accounting issues at the bank, before those issues were made public, according to two sources familiar with the matter.

 

  According to a Reuters report quoting its sources, Sebi is currently reviewing the timing of these trades to assess whether they violated regulatory norms or the bank’s internal code of conduct. IndusInd Bank is the country’s fifth-largest lender, and these trades are under scrutiny to determine if any laws were breached. 

 

The investigation is still at an early stage, and no show-cause notices—formal communications requesting a response—have been sent to the individuals or the bank, the report added. The sources requested anonymity as the probe is confidential. Both Sebi and IndusInd Bank did not respond to emailed queries seeking comment.

 

Earlier this month, a forensic audit by Grant Thornton found that two senior bank executives had sold shares while aware of accounting discrepancies, prior to public disclosure. Sebi has reportedly asked the bank to share the audit report.

 

Back in March, the bank admitted that a long-standing error in the accounting of internal derivative trades had resulted in a $230 million gap in its $60.8 billion balance sheet. Following this disclosure, Chief Executive Officer Sumant Kathpalia and Deputy CEO Arun Khurana resigned last month.

 

According to the report, one of the sources elaborated: “Encashing employee stock options when aware of unpublished price-sensitive information can be a violation of the regulator’s rules.”

 

While insider trading in India can lead to both civil and criminal proceedings, no one has ever been criminally convicted for it. Sebi’s rulings typically involve financial penalties or sanctions, such as temporary bans from the market.

 

IndusInd Bank’s internal code of conduct also allows for actions such as reclaiming bonuses or stock options if such violations occur, the sources noted.