Insider trading: SEBI bans Reliance Industries from equity derivatives market for a year

Reliance Industries has been asked to disgorge Rs 447 crore, along with an annual interest of 12 per cent since November 29, 2007, which itself would be more than Rs 500 crore, taking the total disgorgement amount to nearly Rs 1,000 crore.

Securities and Exchange Board of India (SEBI) today banned Reliance Industries and 12 others from equity derivatives trading for one year and directed the Mukesh Ambani-led firm to disgorge nearly Rs 1,000 crore for alleged fraudulent trading in a 10-year-old case.

A company spokesperson said it will challenge the order. Reliance Industries has been asked to disgorge Rs 447 crore, along with an annual interest of 12 per cent since November 29, 2007, which itself would be more than Rs 500 crore, taking the total disgorgement amount to nearly Rs 1,000 crore. The case related to alleged fraudulent trading in the F&O space in the securities of RILs erstwhile listed subsidiary Reliance Petroleum.

In a 54-page order passed by Whole-Time Member G Mahalingam, RIL and 12 other entities have been prohibited from dealing in the "equity derivatives in the F&O segment of stock exchanges, directly or indirectly".

ONE YEAR BAN

The ban will be in place for one year from today. The 12 other entities are Gujarat Petcoke and Petro Product supply, Aarthik Commercials, LPG Infrastructure India, Relpol Plastic Products, Fine Tech Commercials, Pipeline Infrastructure India, Motech software, Darshan Securities, Relogistics (India), Relogistics (Rajasthan), Vinamara Universal Traders and Dharti Investment and Holdings. Reliance Industries has been directed to disgorge the amount, along with interest within 45 days.

Mahalingam said the directions are being passed after taking into consideration the magnitude of the fraud across the markets. "I am inclined to pass certain directions against the noticees in order to protect the interest of the investors and reinstil their faith in the regulatory system," the order said. "The noticees may, however, square off or close out their existing open positions."

The Reliance Industries group had earlier sought to settle the case, but Sebi had refused. The proceedings in the long-pending case were expedited in the last few months. Reliance Petroleum has been merged with the listed parent firm.

In an order issued today, market regulator Securities and Exchange Board of India (SEBI) barred Reliance Industries Limited from trading in equity derivative Future & Options markers for one year in RPL case.

SEBI also ordered ordered RIL to pay Rs 447 crore plus interest as fine within 45 days in a seven-year-long insider trading case. SEBI said the company had made unlawful gains of Rs 513 crore.

SEBI has also issued showcause notices to 13 companies on Reliance Petroleum case.

The SEBI order says:

Under Sections 11, 11B of the SEBI Act, 1992, Section 12A of the Securities Contracts (Regulation) Act, 1956 read with Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003

In the case of Reliance Petroleum Ltd. (RPL) -

Noticees:

1. Reliance Industries Ltd. (PAN No. AAACR5055K)

2. Gujarat Petcoke and Petro Product supply Pvt. Ltd. (PAN No. AABCG9773E)

3. Aarthik Commercials Pvt. Limited. (PAN No. AACCR0191A)

4. LPG Infrastructure India Pvt. Limited. PAN No. AAACL7928F)

5. Relpol Plastic Products Pvt. Limited. (PAN No. AAACN6007D)

6. Fine Tech Commercials Pvt. Limited. (PAN No. AAACF5232A)

7. Pipeline Infrastructure India Pvt. Limited. (PAN No. AABCD2718F, AABCD2719F)

8. Motech software Pvt. Limited. (PAN No. AACCM0039Q)

9. Darshan Securities Pvt. Limited. (PAN No. AAACD1408Q)

10. Relogistics (India) Pvt. Limited. (PAN No. AACCR3050J)

11. Relogistics (Rajasthan) Pvt. Limited. (PAN No. AAACZ1853B)

12. Vinamara Universal Traders Pvt. Limited. (PAN No. AACCV5090J)

13. Dharti Investment and Holdings Pvt. Limited. (PAN No. AACCD2509C)

Directions :

In view of the above findings and taking into consideration the magnitude of the fraud across the markets; the quantum of unlawful gains made by the Noticee No. 1 (Reliance Industries Ltd ) and the role of the agents in facilitating the fraudulent design, I am inclined to pass certain directions against the noticees in order to protect the interest of the investors and reinstill their faith in the regulatory system.

Accordingly, in exercise of the powers conferred upon me under section 19 of the SEBI Act, 1992 read with sections 11 and 11B of the SEBI Act, and Regulation 11 of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to the Securities Market) Regulations, 2003, I hereby pass the following directions:-

(i) The noticees named above shall be prohibited from dealing in equity derivatives in the F&O segment of stock exchanges, directly or indirectly, for a period of one year from the date of this order. The noticees may however square off or close out their existing open positions.

(ii) Noticee No. 1 shall disgorge an amount of ? 447.27 crores, as ascertained in para No. 5.5 above along with interest calculated at the rate of 12% per annum from 29 November, 2007 onwards, till the date of payment.

(iii) Noticee No. 1 shall pay the said amounts within 45 days from the date of this Order either by way of demand draft drawn in favour of "Securities and Exchange Board of India", payable at Mumbai or by e-payment* to SEBI account