SEBI fines ZEEL promoter entity Cyquator Rs 4 lakh for disclosure lapses on pledged shares

SEBI fines ZEEL promoter entity Cyquator Rs 4 lakh for disclosure lapses on pledged shares

• SEBI fined Cyquator Media Rs 4 lakh for violating takeover disclosure norms
• Cyquator failed to disclose pledge creation and invocation of ZEEL shares
• 52.94 lakh ZEEL shares were transferred and sold after pledge invocation

Did our AI summary help?

Market regulator SEBI has imposed a penalty of Rs 4 lakh on Cyquator Media Services Pvt Ltd, a promoter entity of Zee Entertainment Enterprises Ltd (ZEEL), for violations of takeover disclosure norms relating to pledge and invocation of promoter shares.

In an adjudication order, SEBI held that Cyquator failed to make mandatory disclosures under the Takeovers Regulations, despite creating and later witnessing invocation of a pledge over ZEEL shares.

SEBI found that Cyquator had entered into a pledge agreement on December 14, 2016 with Indiabulls Housing Finance Ltd, under which 60.5 lakh ZEEL shares were encumbered to secure loans. However, the promoter entity did not disclose the creation of the pledge to stock exchanges within the prescribed timeline.

The regulator further noted that the pledge was invoked on January 28, 2019, resulting in transfer of 52.94 lakh shares from Cyquator’s demat accounts to Indiabulls. These shares were subsequently liquidated in the market for over Rs 183 crore. Cyquator again failed to disclose the invocation of the pledge, violating takeover regulations.

Rejecting Cyquator’s defence that it was unaware of the invocation, SEBI pointed out that the pledge agreement explicitly authorised Indiabulls to invoke and sell the shares without prior notice to the promoter.

SEBI also held that Cyquator made an incorrect disclosure under by reporting the transfer of shares as an open market sale, instead of correctly disclosing it as an off-market transfer after pledge invocation.

Cyquator had argued that SEBI’s action was much delayed. However, SEBI Adjudicating Officer Amit Kapoor rejected this argument, noting that the show cause-notice was issued within a reasonable period after the matter came to light through a media report in February 2024, and that the company failed to demonstrate any prejudice caused by the delay.

Considering the violations SEBI imposed a penalty of Rs 4 lakh on Cyquator under for failure to furnish accurate and timely disclosures.