SEBI Penalises Individual For Violating Insider Trading Rules

Capital markets regulator Sebi on Tuesday slapped a fine of Rs 10 lakh on an individual for flouting insider trading norms in the matter of Magma Fincorp (now known as Poonawalla Fincorp Ltd).

The individual (Abhijit Pawar) will have to pay the fine within 45 days, Sebi said.

The Securities and Exchange Board of India (Sebi) received an alert relating to insider trading by certain entities in the scrip of Magma in February 2021.

A preliminary examination by the regulator revealed that Magma had made an announcement on February 10, 2021, on BSE and NSE regarding the acquisition of controlling stake by Rising Sun Holdings Pvt Ltd (Poonawalla Group) in Magma.

The information regarding the acquisition of a controlling stake in Magma by Poonawalla Group was an Unpublished Price Sensitive Information (UPSI) in terms of the PIT rules.

The UPSI period was from January 11, 2021, to February 10, 2021.

Thereafter, Sebi issued a show cause notice in September 2022 to seven entities, including Pawar, alleging that these entities had indulged in insider trading in the scrip of Magma Fincorp and violated PIT (Prohibition of Insider Trading) rules.

'I am of the belief that the facts of the case present a strong preponderance of probability leading to the inference that the noticee (Abhijit Pawar) had provided UPSI to Rakesh Bhojgadhiya, that he had facilitated Bhojgadhiya’s insider trades by providing funds and that the said trades were entirely at the behest of him since he later received the illegal gains by way of investment in his company,' Sebi's Whole Time Member Ashwani Bhatia said in the final order.

Accordingly, Abhijit Pawar has violated the provisions of insider trading norms. The regulator also noted that illegal gains of Rs 8.32 crore earned by Bhojgadhiya and Rakesh Bhojgadhiya HUF have already been disgorged.

In addition, these entities (Rakesh Bhojgadhiya and Rakesh Bhojgadhiya HUF) have already settled the matter and paid an amount of more than Rs 8 crore to the markets regulator, Sebi said.

Thus, the entire ill-gotten gains, along with the additional amount have already been recovered.

Pawar, a close friend of Adar Poonawalla of Poonawalla Group, was involved in the discussions pertaining to the proposed acquisition by Poonawalla Group in Magma and thus had access to and was in possession of the UPSI pertaining to the same, according to the regulator.

Accordingly, Pawar was an insider in terms of PIT rules.

Also, the noticee had a close connection with Rakesh Bhojgadhiya, who was the CEO of 'Sakal Money', which is a company owned by Abhijit Pawar. Further, there was frequent communication between Pawar and Bhojgadhiya during the UPSI period.

These were the facts that were given in the show cause notice, which was directly or indirectly admitted by Pawar, Sebi said in the order.

Bhojgadhiya, through Newgen, had received funds amounting to Rs 15 crore from Pawar and his wife during the UPSI period and utilised the funds for making payments to his brokers for purchasing shares of Magma during the UPSI period, it added.