Insider Trading: Electrosteel Castings' Sr VP Rajesh Daga Slapped with Rs5 Lakh Penalty
Moneylife Digital Team 01 April 2024
Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs5 lakh on Rajesh Daga (noticee), senior vice president for sales and marketing of Electrosteel Castings Ltd (ECL), for buying and selling the Company shares above the threshold of Rs10 lakh without any pre-clearance. 
 
In his 29-page order, N Hariharan, chief general manager and adjudicating officer (CGM and AO) of SEBI, says, " Mr Daga has made a gross profit of Rs1.28 lakh from contra trades during the investigation period (IP). However, the amount of disproportionate gain or unfair advantage made as a result of the other defaults has not been quantified...He disgorged Rs1.22 lakh to SEBI's investor protection and education fund (IPEF) in compliance with the ECL's code of conduct for prevention of insider trading. Mr Daga, being a senior official in the company, needs to be an example for others in the company to comply with law in letter and spirit. Inadvertence and ignorance of the laws cannot be accepted as reasons to justify violations of law."
 
SEBI conducted an investigation with regard to the trading activities of ECL promoter group entities in the company's script prior to the public announcement about the proposed amalgamation of Srikalahasthi Pipes Ltd (SPL) with ECL. The IP was considered from 17 May 2020 to 6 January 2021. From the investigation report, it was observed that Mr Daga executed transactions in the scrip of ECL during the IP and in the period outside the IP.
 
Further, it is observed in the investigation report that Mr Daga, in his email dated 11 December 2022, stated that pre-clearance from ECL was not taken for the trades above. 
 
Additionally, SEBI noted that during the investigation, the trading window of ECL was closed for all designated persons and their immediate relatives from 1 July 2020 till 15 August 2020. During this period, Mr Daga allegedly purchased 5,000 shares of ECL each on 7 July 2020, 8 July 2020 and 28 July 2020, respectively. Further, he is alleged to have sold 16,552 shares of ECL on 7 July 2020.
 
"The penalty of Rs5 lakh levied on Mr Daga underscores the regulatory scrutiny and consequences faced by individuals engaging in insider trading, emphasising the importance of adherence to ethical and legal standards in financial markets," the SEBI CGM says.
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