Crackdown on CIS: SEBI’s crackdown on collective investment schemes (CIS) started with Osian’s Art Fund. The market regulator directed Osian’s Connoisseurs of Art Pvt Ltd, an art fund, to wind up its existing CIS. Osian’s had raised Rs 102.4 crore from 656 investors.
Osian’s was directed to refund the money to its investors within three months and submit a winding-up report. Osian’s was also asked to pay the higher of profits earned according to its offer terms or 10 per cent interest a year.
Citing the Supreme Court order on the Sahara optionally fully convertible debentures case, SEBI said an offer to 50 or more people makes it a public issue. Finding that Osian’s fund satisfied all conditions of a CIS, SEBI banned the art fund.
Saradha Realty was also directed to wind up its CIS. SEBI asked the company to pay back investors within three months. The company and its Managing Director were barred from accessing the capital market. SEBI said Saradha’s scheme satisfied all the conditions of a CIS and issued the directions.
The regulator said Saradha received advance money between Rs 10,000 and Rs 1 lakh for allotting a piece of land or a flat under its schemes. The scheme tenor varied between 15 and 120 months. Investors could also opt for refund of cash with average returns between 12 and 24 per cent. The land/flat allotted was not pre-determined or identified and investors received them only at the time of the final allotment. In addition, investors did not have day-to-day control over the scheme as their contribution was being managed by Saradha.
Exit orders to regional SEs: SEBI passed exit orders for Hyderabad, Saurashtra Kutch and Coimbatore Stock Exchanges for not being able to achieve the prescribed annual turnover of Rs1,000 crore. It also renewed recognition to MCX-SX Ltd and MCX-SX Clearing Corp Ltd (MCX-SXCCL) for one year starting September 16, 2013, on the condition that the exchange would strengthen its governance structure.
It said: “Any non-compliance with the directions of SEBI as given above or which may be given from time to time or any adverse findings by any other regulator may result in withdrawal of recognition of the exchange.”
Disgorgement of unlawful gains in IPOs: SEBI directed financier Jayesh P. Khandwala and his Hindu undivided family (HUF) to repay the unlawful gains of Rs 7.62 crore and undergo a three-month ban from the markets for illegally cornering the retail investor portion of IDFC, Sasken Communications and Suzlon energy IPOs. The amount consisted of Rs 3.88 crore penalty and Rs 3.74 crore interest (totalling Rs 7.62 crore) within 45 days. Passing the order under the Supreme Court directions, SEBI said failure to pay up would lead to the ban being extended by seven years.
SEBI found that Jayesh had acted as financier to Roopalben Panchal, Sugandh Estates and Investment Pvt Ltd (SEIPL) and Biren Kantilal Shah who cornered 9.49 lakh shares of IDFC, 14,275 shares of Sasken and 28,800 shares of Suzlon and transferred the shares off market to Jayesh. Another 11 lakh shares of IDFC were transferred to Bhanu Prasad Trivedi, who acted as a front entity of Jayesh, said SEBI.
Gillette case: Gillette’s proposal to reclassify its promoter (Poddar Group) as public was first disallowed. Gillette then approached the Securities Appellate Tribunal, which in turn upheld the SEBI ruling. However, a couple of months later, on Gillette’s request, SEBI allowed the company to fulfil the minimum public shareholding norm of 25 per cent by reclassifying one of the promoters (the Poddar Group) as public shareholders subject to the conditions below:
SEBI barred Poddar Group from buying Gillette shares for one year from the date of reclassification. It said no special rights other than that of normal public shareholder and no position of key management personnel for Poddar group entities. According to SEBI, the group would have to mandatorily make an open offer if they wanted to be classified again as promoters.
Reliance’s insider trading case: SEBI imposed a fine of Rs 11 crore on Reliance Petroinvestments Ltd (RPIL) for the violation of insider trading norms.
It was alleged that during the period from February 27, 2007 to March 2, 2007, RPIL bought 21.32 lakh shares of Indian Petrochemicals Corp Ltd (IPCL) for over Rs 55 crore at an average rate of Rs 259.42 apiece prior to the announcement of an interim dividend and amalgamation of IPCL with Reliance Industries Ltd, that is, when the price sensitive information remained unpublished.
It was alleged that RPIL did not sell any shares of RIL till March 31, 2007, and received a dividend of Rs 6 a share amounting to over Rs 1.27 crore. Pursuant to record date for merger of IPCL with RIL on October 18, 2007, RPIL received 4.26 lakh shares of RIL as against 21.32 lakh shares of IPCL acquired prior to the dissemination of the price sensitive information.
SEBI deemed RPIL and RIL as insiders based on IPCL’s disclosures as on March 31, 2006, where RPIL was named as a “promoter having control over the company” and further, RIL was shown as a “person(s) acting in concert” with RPIL. The matter is pending before the Securities Appellate Tribunal.
However, a few weeks before levying a penalty on RPIL, SEBI had cleared Manoj H. Modi (consultant to Mukesh Ambani, Chairman, IPCL) and his wife Smita M. Modi of insider trading charges in the IPCL scrip.