The Securities and Exchange Board of India (Sebi) has received complaints of insider trading by Mukesh Ambani-controlled Reliance Petroleum (RPL) and 18 other companies in the past three years, Finance Minister Pranab Mukherjee told the Lok Sabha.
Sebi received complaints against nine companies in 2006, Mukherjee said. Complaints against six companies were made in 2007, three in 2008 and one in January this year, the minister said, without naming the companies concerned.
RPL has been named because the question by MPs Ramesh Dube and Badiga Ramakrishna was whether Sebi had received complaints of insider trading by promoters and associates of various companies, "particularly the oil-based companies."
RPL, a unit of Reliance Industries Ltd, did not reply to an email query.
A background on the RPL case prepared by Sebi said "on November 6, 2007, the derivatives contracts of the RPL scrip reached 95 per cent of the market-wide position limit, thereby inviting upon it a restriction of no further increase in the open interest (OI) position as per the extant rules pertaining to trading in the derivative segment."
Thereafter, from November 7, 2007, a further increase in the OI positions was banned and brokers/clients were permitted to trade only by offsetting their existing positions till the OI came down to 80 per cent of the market-wide position limit.
The price of the scrip fell sharply to Rs 220.35 on November 6 from the previous day's close of Rs 267.55 on the Bombay Stock Exchange (BSE).
On November 23, RPL informed the exchanges that the promoters, RIL, had sold 180 million shares (4.01 per cent of RPL’s equity) between November 6 and November 23.
In view of the volatility in the scrip, Sebi examined the transactions in both the cash and derivatives segment and also asked the National Stock Exchange (NSE) and the BSE to examine the trading of RPL for the period November 1 to 29, 2007.
Sebi did not respond to queries on the issue.
NSE’s observations said RIL, trading through five members — Enam Securities, JM Financial Services, Shriyam Broking Intermediary, Sonal Share & Stock Brokers, SSM Securities — was observed to be selling the scrip from November 6, 2007.
Between November 1 and November 23, RIL was observed to have sold 118.2 million shares in 10 trading days at an average sale price of Rs 223.16. On November 29, RIL was the top client on a net sale basis in the cash market during the last half hour of trading with net sales of 19.5 million shares.
The top clients were observed to have created large net short positions between November 1 and November 6. These entities held a net short position of 79.7 million shares on November 29, 2007, accounting for 93.63 per cent of the open interest. Further, there was no rollover of positions by any of these entities to December expiry, the NSE observation said. Investors who are “net short” usually benefit when the price of the underlying asset decreases.
