Insider trading norm applicable even to inactive promoter: SEBI

Our Bureau Chennai | Updated on October 15, 2019 Published on October 15, 2019

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In an informal guidance to Apollo Tricoat, the regulator asks the ex-promoter to comply with trading-window closure rule

A person identified as a promoter, even if he is not acting as a promoter of the company, exercises no control, plays no role in the management and does not hold any position, should comply with insider trading regulations, SEBI said.

In an informal guidance given to Apollo Tricoat Tubes, SEBI said a person identified as a promoter is required to comply with the code of conduct requirements, as they apply to other designated persons.

The company sought an informal guidance from SEBI as Saket Agarwal, who bought 30.97 lakh shares (16.75 per cent stake) in 2016 from the original promoters of the company and further increased his stake to 39.04 per cent after the mandatory open offer, is currently not playing any active role in Apollo Tricoat following further changes in management control.

In January 2018, the then board had approved a preferential allotment of 72 lakh shares to Rahul Gupta that increased his stake in the company to 31.25 per cent from 4.49 per cent, triggering a mandatory open offer. Besides, the company had also allotted 43 lakh convertible warrants (convertible into equal number of shares) to Rahul Gupta. Following the open offer, Rahul Gupta was appointed Managing Director, even as Saket Agarwal resigned.

However, in October 2018, Rahul Gupta entered into another share purchase agreement with Lakshmi Metal Udyog (belonging to the Rahul Gupta group) for selling 14.01 per cent stake. Due to the hike in Lakshmi Metal Udyog’s stake beyond 25 per cent, another open offer was made. However, in the letter offer made by Lakshmi Udyog, it was reiterated that Saket Agarwal is an erstwhile promoter and intends to be listed under the public category (holding 17.94 per cent stake). “Even though he is not acting as a promoter of the company since May 2018 and is neither in the management of the company, he is reinstated to adhere to trading-window closure requirement as he cannot be classified as a public shareholder due to the provisions of the SEBI (LODR) Regulations,” said the company.

Hence, the company wanted to know whether trading executed by non-designated persons would tantamount to violation of PIT (Prohibition of Insider Trading) norms. SEBI has said he has to comply with the regulations.

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Published on October 15, 2019
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