Insider trading: SEBI restrains Poonawalla Fincorp MD, 7 others

SEBI analysed call records, financial statements and bank statements to make connections between the entities.

The Securities and Exchange Board of India (SEBI) has barred Abhay Bhutada, Managing Director of Poonawalla Finance, and seven others from accessing the securities market after alleged insider trading.

In a 46-page interim order, SEBI said the eight entities had made total wrongful gains of Rs 13.58 crore through insider trading in shares of Magma Fincorp (now Poonawalla Fincorp) around the time it was acquired by Rising Sun Holdings (RSHPL).

"All the Entities, viz: Entity nos. 1 to 8 are restrained from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders," the market regulator said in the interim ex-parte order.

RSHPL had earlier this year acquired a controlling stake in the NBFC through an equity infusion of Rs 3,456 crore. Bhutada was Managing Director and CEO of Poonawalla Finance, a subsidiary of RSHPL.

Bhutada allegedly passed on unpublished price sensitive information (UPSI) to some connected entities, according to SEBI's interim order. The entities allegedly bought shares based on this information, before the news of the acquisition was made public, and made profits after the deal was announced.

SEBI said it had received system-generated insider trading alerts in the scrip of Magma Fincorp for the month of February 2021, around the time the announcement of the acquisition was made. The market regulator began a preliminary examination following these alerts.

SEBI analysed call records, financial statements and bank statements to make connections between the entities.

"Based on the discussions and factual findings on connections, phone calls and funds transfers amongst various Entities as well as transmission of UPSI from Entity no. 1 (Bhutada) to other Entities, it can now be prima facie held that the Entities, by pursuing a modus operandi, have carried out insider trading activities in the scrip of Magma, wherein each Entity has played his / her respective part in pursuance of the said modus operandi," SEBI said.