Brokerage house Ambit Capital has settled with regulator Sebi a case of alleged insider trading in Manappuram Finance shares by paying Rs 6 crore towards settlement charges.
Sebi agreed to settle proposed adjudication proceedings in the case, pertaining to alleged violation of insider trading norms, after it was approached by Ambit Capital with a plea under the settlement regulations "without admitting or denying the findings of fact and conclusion of law".
In a settlement order, Sebi said it has disposed of the adjudication proceedings initiated against the applicant -- Ambit Capital.
It was alleged that Ambit Capital, which is a market intermediary, was in possession of unpublished price sensitive information (UPSI) about Manappuram Finance's quarterly results and the same was circulated to its clients indirectly by way of a negative research report.
Sebi conducted an investigation into the trading in the scrip of Manappuram Finance, wherein it was observed in 2012-13 there was negative earnings per share (EPS) during the quarter ended March 2013 wherein the company made a net loss of Rs 141.43 crore.
Further, during the same financial year, there had been a substantial decline in EPS of the company as compared to 2011-12 (from Rs 7.06 to Rs 2.48, a decline of 64.73 per cent). Therefore, the information of negative profit for the fourth quarter of 2012-13 is deemed to be price sensitive information in terms of Sebi's insider trading norms, the regulator noted.
On March 18, 2013, Manappuram Finance held discussions with Ambit Capital on the quarterly financial results.
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After that meeting, Ambit Capital changed its rating of the Kerala-based firm's stock from "Buy" to "Under Review" and published a research report which was distributed to its clients (broking as well as research) on March 19, 2013 before the market opening hours, Sebi said.
Pursuant to the applications filed by Ambit Capital to settle the case, Sebi's High Powered Advisory Committee recommended the case for settlement on the payment of over Rs 5.99 crore. This was also approved by the regulator's panel of whole-time members, following which it remitted the amount.
Accordingly, the regulator has disposed of the adjudication proceedings initiated against the brokerage firm.
It further said that enforcement actions, including restoring or initiating the proceedings, could be initiated if any representation made by the brokerage firm is found to be untrue.