Poonawalla Finance CEO barred for insider trading
Seven others, too, banned from markets; regulator impounded “ill-gotten gains” of ~13.6 crore
The Securities and Exchange Board of India on Wednesday barred Abhay Bhutada, MD and CEO of Poonawalla Finance, and seven others from accessing the securities market for allegedly being part of insider trading in shares of Poonawalla Fincorp (formerly known as Magma Fincorp). The regulator also impounded “ill-gotten gains” of ~13.6 crore.
The Securities and Exchange Board of India (Sebi) on Wednesday barred Abhay Bhutada, MD and CEO of Poonawalla Finance, and seven others from accessing the securities market for allegedly being part of insider trading in shares of Poonawalla Fincorp (formerly known as Magma Fincorp). The regulator also impounded “ill-gotten gains” of ~13.6 crore.
Sebi’s surveillance alert system detected a suspicious trading pattern in the shares of Magma Fincorp ahead of the acquisition of controlling stake by Adar Poonawalla-led Rising Sun Holding (RSHPL) in February 2021. An analysis done by the regulator showed that a group of connected entities had taken long positions in Magma and later they squared off, generating substantial profits.
After Magma made a preferential allotment of ~3,456 crore to the Poonawalla group, its scrip hit the upper circuit for seven straight trading sessions.
Sebi’s examination of call data records revealed that Bhutada, MD and CEO of Poonawalla Finance, a private subsidiary company of RSHPL, was involved in the dealing-making process and allegedly passed on unpublished price sensitive information (UPSI) to some connected entities. Further, analysis of bank statements revealed that the alleged wrongful gains were shared among the connected entities.
The regulator also found that individuals who took a large position in Magma ahead of the deal announcement had not traded in the scrip before.
“The preventive directions are warranted since Bhutada has now been elevated to the position of MD of Magma (now Poonawalla Fincorp) and has access to ongoing UPSIS of the company,” Sebi has said in an ex-parte interim order.
The regulator said urgent action was taken against the eight entities to protect the interest of investors and ensure market integrity.
For cracking down on insider trading, Sebi has deployed sophisticated data analytical tools, which help detect abnormal and suspicious trading patterns.
In the recent past, the regulator has passed orders for breach of insider trading norms in companies, such as Infosys and Zee. Experts say Sebi’s recent crackdown on insider trading using technology-driven tools has sent a strong signal to the market.