The Hindu Business Line : SAT sets aside SEBI order — Samir Arora cleared of all charges

THE former Chief Investment Officer of Alliance Mutual Fund, Mr Samir Arora, has been absolved of all the charges slapped on him by the Securities and Exchange Board of India.

In one of the most high profile cases in the Indian mutual fund industry, the Securities Appellate Tribunal (SAT) on Friday set aside SEBI's order, which had banned Mr Arora from dealing in the securities market for five years (from August 2003), and cleared him of all three accusations.

SEBI had charged Mr Arora of professional misconduct, fraudulent and unfair trade practices and insider trading.

When Alliance Capital Management (AMC), the parent company, expressed its intention to sell the Indian operations, Mr Arora initially opposed the sale. He later joined hands with Hendersen Global Investors and bid for the same.

As this bid was made when Mr Arora was the CIO of AMC, his action, according to SEBI, brought down the net asset value and the assets under management of the funds. This conflict of interest between the fund manager and the potential acquirer was termed as professional misconduct by SEBI.

On this charge, SAT ruled that there has been no violation of any regulation preventing a fund manager from making an open and transparent bid for buying a fund in which he is employed as fund manager.

Further, Mr Arora was charged with manipulating the prices of the scrips of Balaji Telefilms, Mastek, United Phosphorus and Hinduja TMT.

Referring to his buy-sell decisions on these scrips, SAT said that there was nothing artificial to create a false or misleading appearance of trading, and there was transfer of benefit of ownership with respect to every single transaction.

The most serious charge against Mr Arora was on insider trading in the scrip of Digital Globalsoft Ltd. SEBI said Mr Arora had prior knowledge of unfavourable news of the company and sold the scrip based on this `insider' information.

SAT observed that even the price sensitive information that Mr Arora was supposed to have had, turned out to be false.

"Information which finally turns out to be false or at least uncertain cannot even be labelled as information," SAT said in its order.

The order stated that Mr Arora had suffered needlessly for more than a year without any worthwhile evidence against him.

"We have no hesitation in exonerating him honourably of all the charges," SAT ruled.

Counsel for SEBI asked for a six-week stay on the order, but this was turned down by the tribunal, as there was no provision for it.

SEBI is expected to challenge the order in the Supreme Court.

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