Sebi trolled! Man investigated for HAL insider-trading abuses regulator, attracts Rs 20-lakh fine

Through an order dated June 7, Sebi fined Rajat Mishra Rs 20 lakh for hampering its investigation, and for showing a "callous attitude" and "complete disregard" for the regulator. (Photo by Torsten Dettlaff: Pexels)

A man who was being investigated by the market regulator for insider-trading in Hindustan Aeronautics Limited (HAL) scrips has replied to the regulator with abuse and, strangely, an irrelevant YouTube video link.

To quote his email response to a request to appear before the investigating agency: "“Ek bxxp ki axxxd ho to axxxxt kxxo”. The blanking out has been done in the regulatory order but anyone who reads it can take a good guess what that sentence would have read like.

Through an order dated June 7, the Securities and Exchange Board of India (Sebi) fined Rajat Mishra Rs 20 lakh for hampering its investigation, and for showing a "callous attitude" and "complete disregard" for the regulator.

The abusive email quoted above and dated March 23, 2024 was not the only offensive communication from Mishra.

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There were others emails that were sent before and after, which were dismissive in their tone and even disrespectful in the content.

Sebi had sent a showcause notice to Mishra, asking him why an inquiry should not be held and penalty not be imposed, after seeing suspicious trading activity.

Mishra appeared to have profited from unpublished price sensitive information (UPSI) on a stock split.

Discussions on the stock split started internally on May 1, 2023, and the company informed the stock exchanges on June 8, 2023, about a Board meeting to consider the stock split. Therefore, the UPSI period--when there was information that could affect the price of the stock that was not otherwise publicly available--was between May 1, 2023, and June 8, 2023.

The regulator investigated Mishra's trades from March 1, 2023, to August 10, 2023. That is pre-UPSI period from March 1, 2023, to April 30, 2023; the UPSI period from May 1, 2023, to June 8, 2023; and post-UPSI period from June 9, 2023, to August 10, 2023.

Trade logs showed that Mishra purchased 7,250 shares during the UPSI period, sold just 100 during the UPSI period, and sold the rest of his holding just after the UPSI period when the stock had climbed considerably. By selling the shares immediately after the UPSI period, Mishra earned a profit of Rs 28.9 lakh, according to the order.

The regulator asked Mishra to provide relevant information, Mishra sent an email on February 7, 2024, saying, "I was watching YouTube videos about tard, Reply me".

The regulator asked him again for the information, he responded saying he would be there and then immediately sent another mail saying he won't be able to make it but he could make himself available for a video call.

Not seeing or hearing from him on that day, the regulator issued a summons. In response to that, he emailed a YouTube link to the regulator, which had no relevance to the investigations.

Since he had said that he could do a video call, the regulator again asked him to make himself available for that. The very next day, Mishra responded with the abusive mail quoted above.

Then the regulator sent him a hearing notice through a digitally signed email dated May 28, 2024. To this, Mishra sent an email dated May 31, 2024, in which he asked, "Notice de rxxe ho ya bxxxk mxxxg rxxe ho". Again, the line has been blanked out in the order but it could be read, in Hindi, as asking the regulator if it was sending a notice or begging.

The regulator in its order stated that the material available on record does not quantify any disproportionate gain or unfair advantage or consequent loss caused to an investor or group of investors. Also, "there is nothing on record to show that the violations committed by the Noticee (Mishra) were repetitive in nature".

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But, given that Mishra did not furnish necessary information and failed to appear before the investigating authority, and hampered the investigation, and through his replies showed a "callous attitude" to the regulator, the penalty was imposed.