Insider Trading in Electrosteel Castings: SEBI Slaps Rs10 Lakh Penalty on Deepak Shaw

Moneylife Digital Team 04 July 2025

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs10 lakh on Deepak Shaw for insider trading in the shares of Electrosteel Castings Ltd (ECL).

SEBI found that Mr Shaw, a partner and consultant at Baker Tilly, the financial adviser for ECL’s proposed merger with Srikalahasthi Pipes Ltd (SPL), traded in ECL shares while in possession of unpublished price-sensitive information (UPSI), violating the SEBI (Prohibition of Insider Trading) Regulations, 2015, and relevant provisions of the SEBI Act.

In an order, Jai Sebastian, adjudicating officer (AO) of SEBI, says, " It is alarming to note that Mr Shaw being a partner in Baker Tilly had bought and sold shares of ECL and made profit in the process, while he was a connected person and that too while in possession of UPSI. Irrespective of these, Mr Shaw has tried to justify his trades as above, which in my opinion, cannot be accepted. Based on the foregoing discussions, it is established that Mr Shaw had violated regulation 4(1) of PIT Regulations and section 12A(e) of the SEBI Act.”

ECL had informed the stock exchanges on 30 September 2020 about the closure of its trading window due to the proposed merger with SPL. The board formally approved the draft merger scheme on 5 October 2020. SEBI’s investigation covered the period from May 2020 to January 2021, focusing on trades made prior to the public announcement.

SEBI determined that the merger proposal qualified as UPSI under its regulations since such corporate actions significantly impact stock prices and were not public knowledge. The UPSI period was found to have started on 18 August 2020, when ECL’s chief financial officer (CFO) informed SPL officials about a likely board meeting between 15th and 20 September 2020 to discuss the merger.

While Mr Shaw claimed the UPSI crystallised only on 30 September 2020, SEBI rejected this argument, citing continuous and material communication beginning 18 August 2020, in which Mr Shaw was actively involved.

As a consultant and partner at Baker Tilly, Mr Shaw had access to sensitive, non-public information about the merger. Records showed his participation in conference calls, receipt of confidential emails, and involvement in preparing key schedules related to the transaction. Thus, SEBI classified him as an insider both as a connected person and as one in possession of UPSI.

Trading records revealed that Mr Shaw bought 19,003 shares of ECL between 26th August and 21 September 2020, during the UPSI period, and sold them on 5 October 2020, post-announcement, earning a profit of Rs1.35 lakh. Notably, he had not traded ECL shares for over a year before this period, and during the UPSI timeframe, ECL was his highest traded stock.

Despite his defence that his trades were based on fundamental analysis, Mr Shaw failed to provide evidence supporting this claim. SEBI found his explanation unsubstantiated, especially given his insider status and access to UPSI. Additionally, Baker Tilly’s internal code of conduct expressly prohibits trading in client securities. Mr Shaw’s actions breached these rules, further substantiating SEBI’s findings.

In conclusion, SEBI held Mr Shaw accountable for violating Regulation 4(1) of the PIT Regulations and Section 12A(e) of the SEBI Act by trading in ECL shares while in possession of UPSI and imposed a Rs10 lakh penalty accordingly.

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