India’s capital market regulator barred Future Group CEO Kishore Biyani from accessing the securities market for a year after its investigation revealed insider trading in shares of its retail unit in 2017.
The Securities and Exchange Board of India (SEBI) said Biyani and brother Anil, who was also banned from the securities market, traded in shares of Future Retail Ltd (FRL) through another unit using unpublished price sensitive information. This happened between March 10, 2017, and April 20, 2017, when certain businesses of FRL were recast, causing its share price to rise, it said.
SEBI found the Biyanis opened a trading account for a business named Future Corporate Resources Private Limited (FCRPL), which traded in FRL’s shares before the decision to demerge certain businesses was made public.
In a statement, Future said it will challenge the order. “The SEBI Order is untenable since it treats a well-anticipated and publicly well-known impending reorganisation of the home furnishing businesses that the Future Group effected in 2017 to be unpublished information," it said, adding that the order will not affect its deal with Reliance Industries Ltd.
SEBI also barred Biyani, a few related entities and three others from trading in Future Retail shares for two years. The regulator asked these entities to disgorge an amount of at least Rs 20.53 crore. This is basically the amount that the regulator has estimated as wrongful gains made by these entities.
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SEBI also imposed a penalty of Rs 3.7 crore on Biyani, four others, and related entities.
Amit Tandon, Managing Director of IIAS, a proxy advisory firm, said the insider trading is far more rampant than the various penalties imposed by the regulator suggest. “In this context, the action taken by SEBI highlights the seriousness in going after those that trade on inside information and it is a welcome step. In the past, action was taken after more than a decade. So the shorter time frame between when the trading took place and the SEBI order is welcome.”
The Biyanis and Future Corporate Resources contested the findings of the investigation, according to the SEBI order. But they did not make “any specific submissions regarding wrongful gains made by them”, it said.
The order was passed by Anant Barua, a whole-time member of SEBI.
SEBI found Biyani and others named in the order had traded in the shares of FRL when they had access to this unpublished information. The probe found that the Biyanis had opened a trading account for FCRPL on March 27, 2017.
Indiabulls Ventures was the stock broker.
FCRPL began trading FRL shares between March 29, 2017, and March 30, 2017. The demerger decision was made public on April 20, 2017.
SEBI subsequently issued show cause notices to Biyani, Future Corporate and other entities involved.
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