SEBI Imposes Penalty on 4 Individuals For Violations in Mindtree Share Trades; Indgowth Capital Advisors Fined Rs10 Lakh For Non-compliance of AIF Regulations
Moneylife Digital Team 28 June 2022
Securities and Exchange Board of India (SEBI) has imposed penalties totalling Rs4 lakh on four individuals for violation of insider trading norms in the shares of Mindtree Ltd during the January-March 2019 period when they were designated employees. The regulator has imposed a penalty of Rs1 lakh each on R N Shankar Prasad, Vinay Kumar Sutrave, Ravikumar Kavitha and Gangadharan Sivasankar, according to four separate but similarly worded orders. In a separate case, Indgrowth Capital Advisors was slapped with a penalty of Rs10 lakh for non-compliance with the provisions of AIF (Alternative Investment Fund) regulations. 
 
The orders came following a SEBI investigation after it was intimated about alleged violations of prohibition of insider trading norms by some of the company’s designated persons/employees. The regulator found non-compliance by the individuals with the regulations during January-March 2019 period. During their employment with Mindtree, they had transacted in the securities of the company but failed to make disclosures to the firm as required under the (Prohibition of Insider Trading) rules, as per SEBI. The disclosure requirements were triggered on account of the transactions concerned exceeding the market value of Rs10 lakh.
 
In their defence, the individuals submitted that since the noticees were not ‘designated persons’, therefore, they failed to make disclosures in written format under regulation 7(2)(a) of PIT Regulation for the transaction executed during 1 January 2019 till 31 March 2019. SEBI pointed out that this submission is irrelevant  to the facts of the present matter as the words of regulation 7(2)(a) at the time the noticees committed the alleged violation  were  crystal  clear  that the  regulation  demands  continual  disclosures  from  all employees irrespective of the position/designation of the employee, the level of access the  employee  possesses  with  respect  to  unpublished  price  sensitive  information  of  the company and their connection with the management of the company. 
 
SEBI’s adjudication officer further highlighted that while the violations committed by the noticees fell between the period extending from 1 January 2019 to 31 March 2019, the PIT 2018 Amendment Regulations  which  substituted  the  word  “employee”with  “designated  person”  under regulation 7(2)(a) came into effect only from 1 April 2019. Therefore, the provisions of the PIT 2018 Amendment Regulations do not apply to the noticees.
 
“It  is  pertinent to note  that  the  requirement to submit  disclosures  under  the PIT  Regulations  in the manner prescribed and  within  the time stipulated are sacrosanct as they enable the public to make an informed investment decision  in  a  timely  manner.  By  not  submitting  the  requisite  disclosures  within  the specified time, the concerned persons deprive the investing public of their statutory rights. Further, the disclosure also enables the regulator to properly monitor the transactions in the capital market to effectively regulate the same,” the SEBI order said. 
 
 In a separate order, the regulator imposed a penalty of Rs10 lakh on Indgrowth Capital Advisors for non-compliance with the provisions of AIF regulations. After an examination following a complaint, the regulator found that Indgrowth AIF had exceeded the limit of investment by investing more than 10% of the investable funds in Ugro Capital Limited. This was in violation of AIF norms.
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