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Sebi imposes fine on three persons for lack of disclosure

Their total holding rose to 11.2% in the company, crossing a threshold limit of 10%, which requires disclosures by Sebi

Press Trust of India  |  New Delhi 

Sebi today imposed a penalty of Rs 1.5 lakh on three persons for violating the regulations related to substantial acquisition of shares for dealings in shares of Empower Industries Ltd in 2005.

The Sebi order follows an investigation that revealed that the three persons -- Shantibhai Shah, Bhartiben Shah and Amita H Shah -- had acted in concert with each other for purchase of shares from a promoter and director of Empower Industries on February 25, 2005.

Pursuant to this purchase, their total holding rose to 11.2% in the company, crossing a threshold limit of 10% to attract the provisions of Sebi's Substantial Acquisition of Shares and Takeover regulations, which require disclosures to be made for such a holding.

However, they did not make any such disclosure and were alleged to have violated the Sebi regulations, making them liable for a monetary penalty.

Sebi said that one of the three persons, Shantibhai Shah, received further shares from the same director, accounting for a 5.6% stake, in physical form, but again did not make any disclosure, which is required for purchases of over 5% stake.

Consequently, notices were issued by Sebi to the three persons and they were called for personal hearings. It was submitted before the regulator that non-compliance of Sebi regulations "was purely technical in nature with no malafide intention to harm interest of any other investor.

It was further submitted that this non-compliance was the first time and would not be repeated henceforth.

Sebi observed that charges were established in the case and decided to fix the penalty as per the seriousness of the violation.

"Correct and timely disclosures are an essential part of the proper functioning of the securities market and any failure to do so results in preventing investors from taking well-informed decisions," Sebi said, while observing that it was not possible to ascertain the exact monetary loss to the investors on account of violations made in this case.

"Though it would be difficult to ascertain the disproportionate gain or unfair advantage accrued to the Noticees due to the aforesaid violations, the mere withholding of the information of change in shareholding by a substantial percentage (that is 5%)... Could be considered as a loss to other shareholders/investors," Sebi said.

Accordingly, it decided to impose a penalty of Rs 1.5 lakh on the three persons, jointly and severally (meaning each of them would be liable to pay the fine) and asked them to pay the fine within 45 days.

First Published: Fri, August 31 2012. 20:31 IST