Capital markets regulator Sebi has ordered Factorial Master Fund, a Hong-Kong based firm founded by an Indian origin banker, to disgorge Rs 20 crore worth of illegal gains made by it through insider trading in the scrip of L&T Finance Holdings.
A Sebi probe found that Factorial, incorporated in Cayman Islands, had traded in the scrip of L&T Finance Holdings on the basis of its access to unpublished price sensitive information (UPSI) related to Offer for Sale (OFS) by Larsen & Toubro in its unit.
On March 13, 2014, Factorial indulged in unusual and aggressive trading in the L&T Finance scrip a day ahead of the OFS announcement.
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After taking such a huge short position in the F&O segment on March 13 at an average price of Rs 80.94, the fund took a reverse position on March 14, 2014 in the cash market by subscribing to the OFS at a price of Rs 71.50.
By taking this position, the fund locked-in a profit of approximately Rs 20 crore based on the difference between the average price at which the short position was created and the OFS subscription price.
The fund was guilty of violating fraudulent and unfair trade practices regulations and it traded on the basis of its access to unpublished price sensitive information (UPSI), based on which it took such aggressive positions.
Factorial, which has its office in tony central business district of Hong Kong, was founded by Indian-origin management graduate Barun Agarwal.
In an order, Sebi has directed Factorial to "disgorge the entire profit (Rs 20,04,67,840) unlawfully gained" by it along with with an interest of 10 per cent per annum from March 2014 till the date of payment.
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