Being connected through mutual friends on ‘Facebook’ = Evidence for Insider Trading (SEBI Ruling)

In the case of investigating Insider Trading allegations in the Palred Technologies Ltd (PTL), SEBI In an insider trading case, Securities and Exchange Board of India (Sebi) has ordered impounding of unlawful gains of over Rs 2 crore from 15 individuals.

These individuals were allegedly ‘connected entities’ and had traded in the shares of Palred Technologies Ltd (PTL) while possessing price-sensitive information and allegedly made unlawful gains in the process, Sebi found.

SEBI

The flow is

 a) Palem Srikanth Reddy, was the Chairman and Managing Director (CMD) of PTL.
The investigations have revealed that Palem S. Reddy had communicated/counselled, directly or indirectly the unpublished price sensitive information  (UPSI)to one Ameen Khwaja
b) Ameen Khwaja and Palem Srikanth Reddy were the common directors of  Pal Premium Online Media Pvt. Limited.
c)  Ameen Khwaza was found connected to Pirani Amyn Abdul Aziz was employed with Deloitte Tax Services India Pvt. Limited (a group company of DTT) which had conducted the due diligence of PTL during the slump sale)

The Hon’ble Wholetime Member observed :”Mr. Pirani Amyn Abdul Aziz is also found to be connected to Mr. Ameen Khwaja through mutual friends on ‘Facebook’. ”

He had opened his trading account with HDFC Securities Limited on June 25,2013, i.e.just one day prior to his trading(i.e. June 26, 2015), in the scrip of PTL. Further an analysis of his bank account details revealed that he had
received a series of cash deposits,prior to each payment to his broker for transacting in the shares ofPTL
.
The above discussion, suggests that Mr. Pirani Amyn Abdul Aziz had traded on the PSI regarding the scrip of PTL. In view of the same, he can also be considered to be an ‘insider’ in terms of the Regulations 2(e) of the PIT Regulations who had dealt in the scrip of PTL on the basis of UPSI communicated/ counselled by Mr. Ameen Khwaja
through Mr. Palem Srikanth Reddy

By indulging in such activities, these persons have violated the regulator’s Prohibition of Insider Trading (PIT) norms

The order stated that the entities had traded in the shares of the company on the basis of unpublished price-sensitive information (UPSI) pertaining to slump sale of its software solutions business and declaration of interim dividend and made profits to the tune of Rs 1.66 crore

Case Number:WTM/PS/152/IVD/FEB/2016