Ex-NSEL CEO Sinha, 12 others broke insider trading norms

In two separate orders, the market regulator found 13 persons including Sinha 'prima facie' guilty of violating insider trading regulations with their dealings in shares of MCX and the erstwhile Financial Technologies India Ltd (FTIL) between April 2012 and July 2013.

Both MCX and NSEL were set up by FTIL, then led by its key promoter Jignesh Shah.

While Jignesh Shah himself does not figure among those facing Sebi's crackdown, his father Prakash Shah and brother Manish Shah, as also Tejal Shah (wife of Jignesh Shah's another brother Manjay Shah) are among the 13 persons against whom the regulator has passed orders.

The loss amount averted by Tejal Shah was Rs 30.67 lakh, while the same for Prakash Shah is about Rs 77.9 lakh and Rs 1.4 crore for Manish Shah, Sebi orders showed.

Sebi has also levied an interest of 12 per cent per annum on all these loss amounts.

Among others, former MCX CEO Shreekant Javalgekar averted loss of Rs 64 lakh and his wife Asha about Rs 3 lakh in the case of FTIL shares. Besides, the two averted losses totalling more than Rs 12 lakh in case of MCX shares.

The highest amount of over Rs 48.6 crore (plus interest of over Rs 23 crore) is in case of Paras Ajmera, followed by Rs 31 crore (plus interest of Rs 15 crore) for Hariharan Vaidyalingam in case of MCX. Vaidyalingam was also found to have averted loss of Rs 28 lakh in case of FTIL shares.

V Arvindkumar Iyengar and his wife Dhanashri were found to have averted losses totalling nearly Rs 37 lakh, while the amount was over Rs 56 lakh for Bharat Kanaiyalal Sheth.

Former MCX CEO Joseph Massey averted loss of Rs 58.8 lakh, while the same for Mehmood Vaid was Rs 15.1 lakh.

Sebi said it launched its investigations into alleged insider trading in MCX (Multi Commodity Exchange) and FTIL (which has changed its name to 63 Moons) following a complaint it received in September 2014.

NSEL suspended trading in all contracts on July 31, 2013, after a series of events culminating into coming to light of a major payment default totalling more than Rs 5,000 crore.

Sebi's investigation found that the issuance of a show- cause notice(SCN) by the Department of Consumer Affairs in April 2012 triggered a chain of events with respect to NSEL and its holding company FTIL, and also another FTIL-promoted firm MCX.

The regulator further said a press release was issued by NSEL in October 2012 "to cover up the irregularities in its functioning and to mislead the public".

"Prior to the aforesaid SCN, the irregularities in the functioning of NSEL were not in the knowledge of the concerned regulatory authority and no concrete action had yet been taken until the issuance of the aforesaid SCN, by DCA to NSEL," it added.

Sebi said any material development concerning an impact on the business of NSEL would have automatically impacted the business (including share price) of a company under the same management.

On July 31, 2013, the share price of MCX closed at Rs 640 at BSE and at Rs 638.15 at NSE. As soon as the announcement of suspension of trading by NSEL was made, the price of the scrip decreased substantially on August 1-2, 2013.

In just two days, the share price of MCX touched a low of approximately Rs 410 on August 2, 2013 -- a fall of Rs 230 or 36 per cent from the closing price of July 31, 2013, on BSE.

Similar trend was seen on the NSE.

The share price of FTIL fell even more sharply on these two days by more than 80 per cent -- from about Rs 540 to just about Rs 105, Sebi's probe found. Talking about individuals named for insider trading, Sebi said that Shreekant Javalgekar sold 9,000 shares of FTIL, while his wife Asha offloaded 465 scrips during January-March 2013 period. Besides, the couple together sold 2,200 shares of MCX.

Manish Shah and Prakash Shah, who were directors and promoters of FTIL, sold 15,000 and 10,000 shares of the company respectively between August 2012 and January 2013.

Tejal Shah sold 3,474 scrips of MCX.

Besides, Vaidyalingam, former director at FTIL, offloaded 3,000 shares of FTIL and sold 5,41,482 scrips of MCX.

V Arvindkumar Iyengar, former senior vice president and head of technology department of FTIL, offloaded 2,200 scrips, while his wife sold Dhanashri purchased 100 shares of the company and sold another 2,200 scrips.

Further, Bharat Kanaiyalal Sheth (brother of Ravi K Sheth, director at FTIL till February 2014) sold 6,000 shares of the company.

Sebi found that Vaid, former senior vice president sales and marketing department of FTIL, sold 3,750 shares of MCX.