The Securities Appellate Tribunal (SAT) has directed capital market regulator SEBI to complete its investigation in the case of Factorial Master Fund within two months from Friday. Factorial, Hong Kong-based hedge fund, was restrained from the securities market for short selling over 2.12 crore shares of L&T Finance holdings on the F&O segment (on March 13, 2014) at an average price of ₹80.94. SEBI said that Factorial had made a profit of about ₹20 crore by purchasing over 2.75 crore shares of L&T Finance Holdings in its offer-for-sale (on March 14, 2014) at ₹71.50 a share.

Ban & appeal

Through an interim order in June 2014, SEBI had barred Factorial initially. Later in October 2014, SEBI had issued a confirmatory order, pending further probe, on Factorial, founded by an Indian-origin banker Barun Agarwal.

The fund later moved SAT against the regulator’s order.

SEBI has been directed to issue show cause notice, and pass an order within a month of the notice. If SEBI fails to do both, then its order dated June 5, 2015 would come to an end and Factorial would be allowed to access the securities market, ruled SAT.

Based on assumption’

In the present case, the prima facie view taken by SEBI that Factorial was privy to unpublished price sensitive information before executing its trades, “is based on mere presumption and without any sustainable basis,” SAT said.

“In these circumstances, continuation of the restraint order is unjustified,” the Tribunal said. “There can be no dispute that the appellant has suffered serious prejudice on account of the restraint order, which has been in operation for nearly one year,” SAT Presiding Officer, JP Devadhar, said in his 31-page order..

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