SEBI bars former IndusInd Bank MD Kathpalia and others for alleged insider trading

SEBI bars former IndusInd Bank MD Kathpalia and others for insider trading

Market regulator Securities and Exchange Board of India (SEBI) has barred former IndusInd Bank, MD&CEO, Sumant Kathpalia, former Dy CEO Arun Khurana and three other senior officials of the bank for alleged insider trading.

SEBI’s whole-time member Kamlesh Chandra Varshney in his interim order noted that “All the Noticees, viz. Noticee Nos. 1 to 5 are hereby restrained from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, until further orders”.

SEBI in its interim order noted that they traded in the shares of the Bank after knowing that the derivative accounting issue will have a negative impact on the Bank and also the share price. SEBI alleged that these officials sold the shares to avoid the losses.

As per the SEBI interim order, on November 20, 2023, the then CFO of the bank wrote in an internal email that there will be some impact owing to the discrepancies and a figure of Rs 1,750 crore was reported to senior management. On December 4, 2023, Kathpalia wrote in an internal email, ““we need to do the reporting. There seems to be a huge impact”. SEBI is of the view that this is a clear evidence that senior management of the bank was aware of the impact of discrepancy in accounting and its likely effect on the bank’s financials. SEBI has termed the date of email of Sumant Kathpalia as existing of Unpublished Price Sensitive Information (UPSI).

SEBI in its examination found that Arun Khurana, the then Dy CEO of the bank sold 3.48 lakh shares of IndusInd Bank between December 8, 2023 and 25, June 2024 and avoided a loss of Rs 14.39 crore. Similarly, Sumant Kathpalia, the then MD&CEO, sold 1.25 lakh shares and avoided a loss of Rs 5.20 crore. Sushant Sourav offloaded 2,065 shares and avoided loss of Rs 7.14 lakh. Rohan Jathanna also sold 2,000 shares and avoided a loss of Rs 6.87 lakh. Anil Marco Rao also sold 1,000 shares and avoided a loss of Rs 3.94 Lakhs. In total all the five people avoided the loss of Rs 19.78 Cr during the period.

The SEBI order noted that during the preliminary examination, it is prima facie seen that members of the senior management of IndusInd Bank including these five officials, were aware about the UPSI related to discrepancies and they had kept constant supervision upon the same. The evidences analysed during the preliminary examination revealed that these officials traded in the scrip of bank while being insiders.

The SEBI interim order noted that IndusInd Bank had formed an internal department team to study the RBI Master Direction- Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions) and the first meeting happened by September 26, 2023. The order further noted: “The first meeting of this inter department team was held on September 26, 2023 with respect to Derivative Accounting, wherein the incorrect accounting treatment of Derivative Contracts was noticed”.

Disclosure lapses

SEBI also pointed out that despite the existence of UPSI from December 4, 2023, it was not mentioned in the mandatory structured digital database (SDD). In the SDD it is detailed that which events are UPSI and who all were aware of it. IndusInd Bank classified the same discrepancy in SDD from March 4, 2025. SEBI has found that it was a clear violation of insider trading regulation.

The SEBI examination further revealed that figures pertaining to the discrepancies were not just being monitored by IndusInd Bank itself but were also being proposed to be submitted to the RBI. Internal emails between December 2023 and May 2024 showed figures of discrepancies of Rs 1,572 crore, Rs 1,776.49 crore and Rs 2,361.69 crore, were circulated amongst the employees of bank. However, the same was disclosed to the general public through a disclosure on Stock Exchanges only on March 10, 2025. Finally, on April 27, the Bank reported a discrepancy of Rs 1,959.8 crore.

All the five senior officials against whom SEBI has passed order have been directed to provide a full inventory of all their assets including movable or immovable, or any interest or investment or charge in any of such assets, including property, details of all their bank accounts, demat accounts, holdings of shares/securities if held in physical form and mutual fund investments and details of companies in which they hold substantial or controlling interest immediately maximum within 15 days.

The bank accounts of all the five officials will be impounded to the extent of Rs 19.78 crore as SEBI found this was the amount of the loss they avoided by insider trading.

More under scanner

The interim order also indicated that more people are under the scanner. As per the order, “A detailed examination by SEBI with respect to insider trading (against these Noticees as well as against other suspects) as well as on disclosure violation and other violations is already undergoing which may be completed expeditiously”.

SEBI also clarified that, at no stage of about two and half months of examination so far, SEBI had closed down its examination by giving clean chit as reported by certain section of media.

The officials facing insider trading allegations have been given 21 days from the date of receipt of the order to file their reply.