Two individuals settle insider trading case with Sebi paying Rs 74 lakh

Two individuals, including a former employee of Deloitte India, on Monday settled with capital markets regulator Sebi a case pertaining to the alleged violation of insider trading rules by paying Rs 74 lakh towards settlement fee.

Nimai Parekh and Rahil Dalal (applicants) had proposed to settle the matter by neither "admitting nor denying the findings of fact and conclusions of law", Sebi said.

"In exercise of the powers...and in terms of the settlement regulations, it is hereby ordered that any proceedings that may be initiated for the violations are settled in respect of the applicants," Sebi's whole-time member Kamlesh C Varshney said in the settlement order.

Sebi conducted an investigation in the scrips of HDFC Ltd and HDFC Bank Ltd, so as to ascertain whether any suspected entities on the basis of information relating to amalgamation/merger, had traded in the scrips, and thereby violated PIT (Prohibition of Insider Trading) rules.

The investigation period was taken from November 2021 to April 2022.

The Securities and Exchange Board of India (Sebi) noted that HDFC and HDFC Bank made an announcement to the exchanges about the merger before the market hours on April 4, 2022.

The regulator found that Parekh was part of the valuation team of Deloitte Touche Tohmatsu India which was appointed by HDFC Bank as valuer for the merger.

As per data provided by HDFC Bank, Deloitte was appointed as valuer on March 29, 2022. Therefore, Parekh was in possession of information pertaining to merger since March 29, 2022.

According to Sebi, the information pertaining to the merger was found to be an Unpublished Price Sensitive Information (UPSI) and the UPSI period was considered from December 13, 2021 to April 4, 2022.

Sebi also observed that Rahil Dalal was a close friend of Parekh who was an insider for the announcement in terms of insider trading norms. Dalal was also found to be talking frequently to Parekh.

Thus, Dalal was also found to be an insider since he had reasonable access to UPSI through Parekh. Further, the regulator also alleged that Parekh had communicated the UPSI to other applicants in violation of PIT norms.

Sebi noted that Dalal had procured UPSI from Parekh and shared this information with his father as well thereby flouting rules.

Pursuant to the receipt of the settlement application, Parekh and Dalal filed revised settlement terms to settle the matter that may be initiated against them for the alleged violations.

Thereafter, Sebi's High Powered Advisory Committee (HPAC) approved the terms, which recommended the matter be settled.

After remitting the settlement fee of Rs 39 lakh paid by Parekh and Rs 35 lakh by Dalal, the applicants settled the case with Sebi.