Sameer Arora gets clean chit

Tribunal says no substance in Sebi's charges.

The Securities Appellate Tribunal (SAT) yesterday exonerated Samir Arora, the former chief investment officer of Alliance Capital Mutual Fund, of all charges levelled by the Securities and Exchange Board of India (Sebi).

Setting aside Sebi's March 31 order, in which the regulator had barred Arora from the capital markets for five years, the three-member tribunal said there was no substance in any of the three charges against him.

However, this ruling is without prejudice to any action which Sebi wishes to take against the sponsors and trustees of the fund, SAT said. Sebi officials said off the record that they would appeal against the SAT ruling, but an official spokesman said: "We have to go through the order in detail before taking any decision."

Speaking to Business Standard, Arora said: "The past year has been exacerbating for me but I am pleased that justice has been served. I am bullish on India and am delighted to be back in the stock markets."

On the charge of professional misconduct brought by Sebi, referring to Arora bidding for the assets of Alliance Capital Mutual Fund (ACMF), along with Henderson Global Investors, the SAT ruling said throughout Arora had been open and transparent about his intentions.

It also pointed out there was no evidence on record that Arora was responsible for the fall in assets under management (AUM) of the fund.

It said a person could not be punished unless some violation had occurred and "no such violation of any regulation has been pointed out to it (SAT) by the respondent (Sebi) to show a fund manager cannot make an open and transparent offer for buying a fund in which he is employed as a fund manager."

The tribunal also pointed out that Arora's bid had been made much before the others, and had been widely reported in the press. The ruling also noted there had been no unusual fall in the net asset value of the schemes "and the fall in AUM was also in accordance with what normally happens when mutual funds are sold".

Referring to Arora allegedly compromising the interests of Indian mutual fund investors by actions intended to benefit the parent company --- since Arora was the fund manager for both the domestic fund house and the FII operations --- which formed the basis of the second charge, the ruling said: "There is nothing artificial or non-genuine or intended or calculated to create a false or misleading appearance of trading and there was transfer of beneficial ownership in respect of every single transaction."

On the third charge of insider trading, where Arora allegedly sold the shares of Digital GlobalSoft based on insider information, SAT said the price-sensitive information based on which Arora transacted in the scrip was not correct, because the merger was not announced on May 12, 2003.

"Information which finally turns out to be false or at least uncertain cannot even be labelled information," the ruling said. It said Arora's sale of securities was based on his own analysis of the situation.

SAT pointed out that Sebi had made no attempt to show how the information was leaked to Arora by the company's directors, whose credentials could not be doubted.

The ruling pointed out that apart from Arora, "several other funds had also sold the same scrip in the same month in substantial numbers..." It also said there had to be independent evidence in support of this charge.

While exonerating Arora, the tribunal also said Sebi was not to be blamed though it should have taken the replies furnished by Arora with an open mind.