Sebi cancels Bank of Madura share deal

The Securities and Exchange Board of India has asked the Bombay Stock Exchange to cancel the trade of 5,08,250 shares of Bank of Madura exec...

The Securities and Exchange Board of India has asked the Bombay Stock Exchange to cancel the trade of 5,08,250 shares of Bank of Madura executed through LKP Share and Stock Brokers Ltd on December 6, 2000 which was struck prior to the announcement of merger of BoM with ICICI Bank.

This is without prejudice to any action, which may be taken by Sebi against any of the parties, involved in the said transaction under Sebi Act/ Regulations, Sebi has said. ‘This means the alleged insider trading case in the BoM share has reached the final stage. Sebi should initiate action against the persons responsible for this insider trading,’ said an analyst.

It may be recalled that investigations were conducted into the abnormal trading pattern in the scrip of BoM just prior to the announcement of its merger with ICICI Bank. On this day LKP had sold 5,64,250 shares and purchased 5,08,250 shares. The shares were sold on behalf of SPIC group of companies/associated entities, which sold 5,64,250 shares and B Arun Kumar Credit and Capital Ltd was one of the major purchaser who has purchased 5,08,250 shares. The transaction was a cross deal. “Speculation was rife then that there was insider trading in BoM shares before the merger announcement,” marketmen said.

It was observed that BoM was not a very liquid scrip. The average volume of this scrip in BSE in the period of September 4 to December 1, 2000 was to the tune of 1,550 shares per day (the price was Rs 85 per share on close of December 1, 2000). However from December 4, 2000 the price started moving up and it was accompanied with increased volumes. The price touched Rs 131.60 on the BSE and Rs 132.25 on the NSE on the day when proposed merger was intimated to exchanges ie on December 8, 2000. It was also observed that on December 6, 2000 there was a huge volume of 5,87,970 shares in BSE even though as mentioned above the scrip was by and large ill liquid. On analysis of this unusual volume on December 6, 2000, it was observed that out of 5,87,970 shares traded, LKP Shares & Securities was the largest purchaser as well as seller.