Samir Arora barred for 5 years

Action should act as a 'deterrent for others': Sebi

Samir Arora, the former chief investment officer of Alliance Capital Mutual Fund (ACMF), has been barred from dealing in the securities market for five years, from August 9, 2003.

The Securities and Exchange Board of India (Sebi) said the strict action should act as a "deterrent for others of similar disposition."

Issuing the final order against the high-profile fund manager, Sebi said Arora could, however, sell the securities "currently held by him," but only after obtaining Sebi's prior written permission.

In the order, Sebi's wholetime director, TM Nagarajan, said: "The conduct of Samir C Arora was not in accordance with sound market principles. Considering the facts and circumstances of the case in totality and the blatant misconduct and violations committed by Samir Arora of the regulatory provisions, I find it a fit case  warranting serious action against him for his misdeeds so as to act as a deterrent for others of similar disposition."

Nagarajan also pointed out that Sebi had already initiated adjudication proceedings against ACMF. Justifying the action against Arora, Nagarajan said in the order: "Normally, action needs to be taken against the entity found guilty of violation of law. However, a corporate body operates and acts through its directors and other key persons in charge of its business operations."

"It may be, therefore, essential, in appropriate cases, to lift the corporate veil and take action against the individuals, whose conduct is primarily responsible for the misconduct or violation of law by the corporate body, besides action against the corporate body," the Sebi order, posted on its website, said.

Nagarajan said Arora had been found guilty of misconduct and violating the law and was primarily responsible for the commissions and omissions of the Alliance Capital Mutual Fund and its AMC. 

 "Therefore, action against him is required in order to protect the interests of investors and ensure safety, integrity and the orderly development of the securities market."

Investigations against Arora established that "Arora, as an insider, sold the shares of Digital GlobalSoft (DGL) while in possession of unpublished price sensitive information, related to its merger with Hewlett Packard, which attracts the provisions of Regulation 2(e) and 2(h) (ii) of Sebi (Prohibition of Insider Trading) Regulations 1992."

Investigations also revealed that Som Mittal of DGS knew Arora for the past 5-6 years.

Arora and his analysts used to make regular visits and interact with the management and its senior officials to discuss the performance and future plans of the companies in which they invest.

ACMF held 1,466,140 shares of DGL which constituted around 4.45 per cent of the total paid up capital of DGL.

The funds managed by Arora were the single largest shareholder group of DGL, after Compaq Computer Holdings Ltd. The funds held nearly 10 per cent of the total paid up equity capital of DGL for several months (from January 2002 to January 2003) and therefore, ACMF had a special interest in DGL and vice versa.