Going by the fines it recently imposed on top corporate executives accused of insider trading, the Securities and Exchange Board of India
, or SEBI, is serious about cracking down on the white-collar crime. And India's 35 million retail investors, holding shares in 5,000 plus listed firms, will be pleased.
On January 5, SEBI issued three adjudication orders, pulling up Jaiprakash Associates's Executive Chairman Manoj Gaur
, his wife Urvashi Gaur, brother Sameer Gaur, whole-time director S.D. Nailwal, and Senior Vice President (corporate affairs) and Company Secretary Harish K. Vaid for alleged insider trading.
The executives were accused of using their positions to trade in the company's shares in 2008, while in possession of unpublished price-sensitive information. SEBI found them to be in violation of its rules and imposed a fine of Rs 70 lakh.
A day earlier, the regulator had imposed fines of Rs 60 lakh on V.K. Kaul, a former independent director of Ranbaxy Laboratories, and his wife Bala Kaul, accusing them of insider trading. It alleged that Kaul, who knew that Ranbaxy arm Solrex was going to buy shares of Orchid Chemicals, carried out trades in his wife's name ahead of the transaction.
Interestingly, for the first time, the watchdog relied on telephone records to build its case. It cited many calls made by Kaul to Malvinder Mohan Singh (Ranbaxy's former CEO & MD) and Omesh Sethi (Ranbaxy's former Vice President and head of global finance) during the period in question. Singh and Sethi had access to the unpublished price-sensitive information.
In separate responses, those accused said that the quantum of their trades was too insignificant to be construed as insider trading. Manoj Gaur, in a late evening release on the day of the order, termed the findings as "completely erroneous and contrary to the factual position".
The statement added that the company's executives were in the "process of challenging the order before the Securities Appellate Tribunal". However, SEBI's action underlines that breach of the spirit of the law was the primary reason for punishment - the value of the transaction was irrelevant.
SEBI's increased surveillance is turning up more and more instances of such violations. In financial year 2010, it investigated 71 cases, of which only 10 - around 14 per cent - were insider trading cases. Last fiscal year, it took up 104 cases, and around 28 per cent pertained to insider trading.