SEBI Slaps Rs20 Lakh Penalty on Rajat Mishra for Not Complying with Its Summons in HAL Case

Moneylife Digital Team 10 June 2024

Investor Interest

Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs20 lakh on one Rajat Mishra for insider trading and failing to respond to summons and furnish information. SEBI investigation revealed that Mr Mishra and another entity were engaged in suspicious trading activities prior to a public announcement by Hindustan Aeronautics Ltd (HAL) on the stock split.

In an order, Amar Navlani, adjudicating officer (AO) of SEBI, says, " I note from the material available on record that as per SEBI, failure to furnish information and failure to appear before the investigating authority by Mr Mishra had hampered the investigation process and also that the reply of Mr Mishra to SEBI shows his callous attitude and complete disregard to the regulator. In view thereof, I am of the view that such violations on the part of Mr Mishra have to be dealt with the imposition of suitable penalty."

HAL informed Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on 8 June 2023 about a board meeting scheduled for 27 June 2023 to consider a stock split. Following this announcement, the stock price of HAL opened at Rs3,609 and closed at Rs3,732.9 on 9 June 2023, a significant increase from the previous day's close of Rs3,527.40.

The regulator investigated Mr Mishra's trades from 1 March 2023 to 10 August 2023.

SEBI further found out that the trade logs of Mr Mishra showed that he purchased 7,250 shares during the unpublished price sensitive information (UPSI) period, sold just 100 during UPSI and sold the rest of his holding just after the UPSI period when the stock had climbed considerably.

According to the order, by selling the shares immediately after the UPSI period, Mr Mishra earned a profit of Rs28.9 lakh.

Despite multiple attempts by SEBI to obtain information from Mr Mishra, he failed to comply. Requests for details about his trading activities, sent via emails and summonses, went unanswered. Instead, Mr Mishra provided irrelevant responses, including a YouTube video link, and failed to appear for scheduled hearings or video calls.

The non-compliance, including ignorance towards emails and summons, led the AO to conclude that Mr Mishra obstructed the investigation. "His trading activities during the UPSI period and subsequent non-cooperation suggested insider trading. The investigation could not definitively prove UPSI's communication due to Mr Mishra's lack of cooperation," the AO says.

SEBI found Mr Mishra in violation of Sections 11C (2), 11C (3), and 11C (5) of the SEBI Act, 1992. These sections mandate the preservation and production of relevant documents and their appearance before the investigating authority (IA). Mr Mishra's actions impeded the investigation process, the market regulator says.

Comments

User

parimalshah1

7 months ago

Unless a mandatory jail term is prescribed front running, and similar illegal acts; will not stop. When only financial penalty is levied, the amount of penalty is often much less than what the guilty has amassed. I wonder if there is a nexus between some people in SEBI and operators in the market.