Sebi mulls penal action against PNB, Gitanjali

Regulator, bourses analyse trade details of Modi, Choksi entities

Markets regulator Sebi will consider penal action against Punjab National Bank (PNB) and Gitanjali Gems after completion of its probe into suspected trading and disclosure related issues in the matter of over Rs 14,000-crore fraud, senior officials said.

The markets watchdog last week issued a warning letter to PNB for delaying disclosures to stock exchanges about the fraudulent transactions allegedly carried out by absconding Nirav Modi and Gitanjali Group of companies. However, the probe is continuing and the penal action would depend on the final outcome of the investigation, the officials added.

PNB was defrauded allegedly by the diamond trader and his associates by fraudulent use of Letters of Undertakings (LoUs) and Foreign Letters of Credit (LoC) in connivance with certain bank officials.

The Securities and Exchange Board of India (Sebi) and stock exchanges have been analysing the stock market trade details of all entities associated with Modi and Gitanjali Gems' main promoter Mehul Choksi, who has already been under scanner for various cases including a brokerage default incident, senior officials said.

Incidentally, in July 2013, NSE in consultation with Sebi had debarred Gitanjali Gems and Choksi, among others from trading, for securities market violations relating to trading in his company.

Further, they are also being investigated by the Enforcement Directorate (ED) and Central Bureau of Investigation (CBI). As per Sebi's warning letter, there were delays of 1-6 days by PNB in making disclosures to the stock exchanges pertaining to the filing of complaints with the RBI and CBI. This delay in informing the stock exchanges is a violation of the listing regulations.

Under these norms, companies need to inform stock exchanges about any price sensitive information in a timely manner.