Stock Market regulator SEBI has fined T.A.N. Murti, Rs 65 lakh for insider trading, in the Satyam Computer Services (SCS) scrip in December 2008.

SEBI found that Murti, the then Head — Investor Relations of SCS had sold a major chunk of his holdings (14,500 shares of SCS) on December 15, 2008. His holding reduced to 3,000 shares, post the sale.

SCS had announced a proposal to acquire Maytas Infra and Maytas Properties on December 16, 2008, and cancelled the proposal on December 17.

On December 17, the SCS scrip lost 33.5 per cent to record a low of Rs 151 a share before recovering to close at Rs 157.1 a share.

SEBI also observed that certain employees and clients sold SCS shares between November 25 and December 16, 2008 till before the announcement.

In addition, some 80 clients sold shares before January 7, 2009, when B. Ramalinga Raju, the then SCS Chairman, confessed to artificially inflating the company financials.

The trading window (for insiders) was closed from December 17, 2008, and stayed closed till June 12, 2009.

‘Only draft proposal’

Murti contended that he only received a draft proposal of merger from Srinivasu Satti the then Head — Mergers and Acquisitions SCS on December 14, 2008 without the names of the companies.

However, SEBI found that Murti received another mail from Satti titled Maytas Properties which contained the financial statement of a company with code B2 on the same day.

SEBI observed that if Maytas Properties was B2, it could be reasonably presumed that B1 was Maytas Infra.

Mobile records

Further mobile records revealed that Murti and Satti spoke to each other twice — once on December 14 (12:36:05 hours) and again at 19:27 hours on December 15, 2008 and the conversation lasted for nine minutes.

Murti sold 14,500 shares at an average price of Rs 226 per share on December 15, a day before the news of acquisition of the two Maytas companies became public.

SEBI found that Murti avoided a loss of Rs 21.54 lakh by selling on December 15, 2008.

Had he sold those shares on June 15, 2009, after the opening of the trading window, he would have realised only Rs 77.40 per share.

SEBI ruled that Murti was indeed an insider and finding him guilty of insider trading, the regulator fined him Rs 65 lakh.

(This article was published on December 21, 2012)
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