Former Deloitte employee, friend pay over Rs 70 lakh to settle insider-trading allegations

Parekh was part of the valuation team of Deloitte Touche Tohmatsu India LLP which was appointed by HDFC Bank Ltd. as valuer for the merger of HDFC Bank Ltd. & HDFC Ltd.

A former member of the valuation team at Deloitte Touche Tohmatsu India and his friend have paid Rs 74 lakhs in total to settle allegations of violation of insider-trading norms, in the scrips of HDFC and HDFC Bank.

In a settlement order issued on December 20, the Securities and Exchange Board of India (SEBI) said that the former member of the valuation team Nimai Parekh was asked to pay Rs 39 lakh and his friend Rahil Dalal was asked to pay Rs 35 lakh as settlement amounts.

While Parekh informed SEBI about the remittance of the amount on December 5, Dalal informed the regulator about the remittance of the amount on December 9.

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The regulator had conducted an investigation in the scrips of HDFC Ltd. and HDFC Bank Ltd. to check if any entities traded in the scrips based on unpublished price-sensitive information (UPSI) relating to the amalgamation/merger. The period under investigation was between November 01, 2021, and April 30, 2022.

On April 04, 2022 at 08:56 AM, before the market hours, HDFC Ltd. and HDFC Bank Ltd. made an announcement to the Exchanges about the merger, wherein it was disclosed that HDFC Ltd. will merge into HDFC Bank Ltd.

Parekh was part of the valuation team of Deloitte Touche Tohmatsu India LLP which was appointed by HDFC Bank Ltd. as valuer for the merger of HDFC Bank Ltd. & HDFC Ltd. Deloitte was appointed on March 29, 2022.  Therefore, Parekh was in possession of the information about the merger since March 29, 2022.

Dalal, a close friend of Parekh, was found to be talking frequently with Parekh and was therefore Dalal was considered an insider "since he had reasonable access to UPSI" through Parekh.

Rupesh Satish Dalal is the father of Rahil Dalal and karta of Rupesh Dalal HUF. From the trading details of Rupesh Dalal HUF, it was observed that it had bought multiple call option contracts of HDFC Ltd. and HDFC Bank Ltd. prior to the announcement and sold the same post the announcement and earned a profit of Rs. 5.67 lacs in HDFC Ltd. and Rs. 2.52 lacs in HDFC Bank Ltd.

Thus it was alleged that Parekh may have communicated the UPSI to Rahil Dalal, who may have shared the information with his father, thereby violating the provisions of Prohibition of Insider Trading (PIT) Regulations.