Sebi drops Reliance insider trading case

Adjudicating officer says investigations couldn't establish that the Reliance-owned firm had access to insider information when it bought IPCL shares

The Securities and Exchange Board of India (Sebi) has disposed of insider trading proceedings against Reliance Petroinvestments, a group company of the Mukesh Ambani-led Reliance Industries.

The case date backs to 2007, before the merger of Indian Petrochemicals Corporation (IPCL) with Reliance Industries. A Sebi order in May 2013 had charged Reliance Petroinvestments with insider trading and imposed a penalty of Rs 11 crore on it.

The order had said Reliance Petroinvestments had made profits of Rs 3.8 crore by acquiring 2.1 million shares of IPCL from February 27 to March 2, 2007, on insider information on dividends and the impending merger.

In the latest order, Sebi Adjudicating Officer Suresh Gupta dropped the proceedings against Reliance Petroinvestments citing a lack of evidence.

“In absence of any evidence to establish the access of  unpublished price-sensitive information to Reliance Petroinvestments, it can be concluded that Reliance Petroinvestments and Reliance Industries are not ‘insider’ as alleged,” Gupta said in an order dated March 8.

The latest order comes after the Securities Appellate Tribunal (SAT) last December quashed the Sebi’s May 2013 order and gave the market regulator three months to issue a fresh order in the matter.

Reliance Industries had argued that Reliance Petroinvestments was a group entity formed to acquire shares of IPCL during the government’s disinvestment process. It stated that Reliance Petroinvestments had acted independently and was not in possession of price sensitive information on dividends or the impending merger.

RIL awaits verdict in another case

Sebi is yet to pass a final order in another insider trading case involving Reliance Industries, which, too, dates back to 2007. Reliance Industries allegedly made illegal gains of Rs 513 crore by dealing in shares of its erstwhile subsidiary Reliance Petroleum (RPL).

Ahead of the merger, RIL purportedly sold shares of RPL in the futures market and later position in the spot market. RIL had tried to settle this case under the consent route.

The company had moved the SAT challenging Sebi’s refusal to settle the case under the consent mechanism, which allows an entity to settle a case by paying a monetary penalty or undergoing market ban or both. In June 2014, the SAT had refused to give any relief to RIL . According to legal experts, RIL could have to pay a penalty of at least Rs 1,500 crore (three times the profit) if proven guilty.

 

“The investigation report does not bring out the names of the persons reasonably expected to have access to unpublished price sensitive information,” the adjudicating officer said in the fresh order. He added the investigation report was silent on whether Ashok Jain, who was placing orders for IPCL shares for Reliance Petroinvestments, had access to price sensitive information.

BREATHER FROM REGULATOR
The Sebi upturned its previous order of a fine on the Reliance Petroinvestments in an insider trading case

• May 2013: Sebi imposes Rs 11 crore penalty on RIL group firm Reliance Petroinvestments (RPIL) in insider trading case
   
• Jul 2013: RPIL moves the SAT against the Sebi order
   
• Dec 2015: The SAT quashes the Sebi order and asks the regulator to issue a fresh order in three months
   
• Mar 2016: The Sebi adjudicating officer disposes of proceedings against the RPIL