The Securities and Exchange Board of India (Sebi) on Friday imposed penalties totaling Rs 70 crore on Reliance Industries Ltd (RIL), its chairman & managing director Mukesh Ambani, and two other entities for alleged manipulative trading in the shares of erstwhile Reliance Petroleum Ltd (RPL) in November 2007.
The market regulator has levied fines of Rs 25 crore and Rs 15 crore on RIL and Ambani, respectively. Besides, Navi Mumbai SEZ Pvt Ltd has been asked to pay Rs 20 crore and Mumbai SEZ Ltd has been directed to pay Rs 10 crore.
“I find it appropriate to consider the direction in the nature of debarment and the disgorgement that has already been passed against RIL as a relevant factor while deciding the quantum of penalty,” said Sebi’s Adjudicating Officer B J Dilip in a 95-page order.
It said any manipulation in the volume or price of securities always erodes investor confidence in the market when investors find themselves at the receiving end of market manipulators.
“In the instant case, the general investors were not aware that the entity behind the above F&O segment transactions was RIL. The execution of the aforesaid fraudulent trades affected the price of the RPL securities in both cash and F&O segments and harmed the interests of other investors,” the order further said.
“Noticee-2, being the Managing Director of RIL, was responsible for the manipulative activities of RIL. I am of the view that listed companies should exhibit highest standards of professionalism, transparency and good practices of corporate governance, which inspires confidence of the investors dealing in the capital markets. Any attempt to deviate from such standards will not only erode the confidence of the investors but also affect the integrity of the markets,” the adjudicating officer said.
The execution of manipulative trades affects the price discovery system itself. It also has an adverse impact on the fairness, integrity and transparency of the stock market, the order added.
The RPL case has been hanging fire for the last 13 years. RIL had sold 4.1 per cent of its stake in RPL. However, to prevent a plunge in the RPL share price, the equity was apparently sold first in the futures market and later in the spot market. The crux of the Sebi notice is that the company was aware there would be a sale of shares in the spot market and hence, its sales in the futures market before that amounted to insider trading. RPL merged with RIL in 2008.
On November 6, 2020, the Securities Appellate Tribunal (SAT) had dismissed a plea by RIL challenging the Rs 447-crore disgorgement order passed by Sebi.
The Whole Time Member of Sebi, in an order dated March 24, 2017, directed RIL to disgorge an amount of Rs 447.27 crore along with interest calculated at the rate of 12 per cent per annum from November 29, 2007 onwards till the date of payment. Further, RIL was prohibited from dealing in equity derivatives in the F&O segment of stock exchanges, directly or indirectly, for one year from the date of the said order.
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