Mukesh Ambani-owned Reliance Industries (RIL) is at an advanced stage of negotiations with the Securities & Exchange Board of India (Sebi) to settle a case of alleged insider trading. This is the third time that the country's largest private sector entity has requested a settlement on a probe that originates from trades conducted in 2007.
According to a person familiar with the matter, RIL has in its latest attempt offered to pay a higher settlement charge. In the first consent plea made in November 2009, the company was ready to fork out Rs 2 crore. Sebi is said to have assessed the illegal gains from the alleged insider trades at over Rs 500 crore.
“RIL has applied for consent and the deliberations are at an advanced stage. It all depends on whether the regulatory panel finds the consent plea attractive this time,” said a person who did not wish to be named. The second consent appeal was made by RIL in August 2010.
The case goes back to November 2007 when stock futures of Reliance Petroluem were sold just days ahead of parent RIL bringing down its stake in the company. Some sellers were allegedly located at the same address as that of RIL group companies.
Sebi initiated the probe after receiving anonymous complaints. RPL was merged with RIL in 2009 and subsequently delisted. Sebi first issued show-cause notices to RIL in this matter in May 2009, while the initial probe began in early 2008.
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People privy to the development say RIL has argued that the transactions were carried out to protect market sentiment and that there was no ulterior motive. It has further said that the incidental profit was made by a listed company, which is “distributable” to shareholders. RIL’s spokesperson, meanwhile, declined to comment on this issue.
In December 2009, Minister of State for Finance Namo Narain Meena said end-use violations were spotted by the Reserve Bank of India in two external commercial borrowing transactions – worth $360 million and $150 million — by Reliance Infrastructure. The company invested the proceeds in debt mutual funds, pending declared end-use utilisation, in gross violation of existing guidelines, he said in a written reply in the Rajya Sabha.
Reliance Infrastructure and RNRL, along with some top group executives including chairman Anil Ambani, were issued several notices in the second half of 2010 to depose before the regulator.
Sebi sent show-cause notices to eight ADAG entities on June 9 and directed them to inspect the documents and reply to the notices by June 30. Thereafter, in July, the regulator gave the entities an opportunity to appear personally for a hearing on August 2.