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The capital market regulator SEBI has fined Piramal Enterprises, Ajay Piramal and two family members and N Santhanam, former CEO, for violating insider trading rules just before the company’s May 2010 deal to sell its domestic healthcare business to Abbott Laboratories.
According to the Securities and Exchange Board of India’s order on Monday, these parties “failed to handle the unpublished price-sensitive information (UPSI) of the (Abbott) transaction on a ‘need-to-know’ basis” and failed to close the trading window, violating the Prevention of Insider Trading Regulations, 1992.”
SEBI also found that Harinder Sikka, Director, Piramal Enterprises, did not obtain pre-clearance to trade in the company’s stock during the UPSI period and traded on his stock options at the time, because the trading window had not been closed, even though there is no record of him having access to the UPSI.
As per the order, Piramal Enterprises, Ajay Piramal, Swati Piramal, Nandini Piramal and N Santhanam have been fined ₹6 lakh in total for the two offences.
In May 2010, Piramal Enterprises (known at the time as Piramal Healthcare) announced that it would sell its pharmaceutical solution business to US-based Abbott Laboratories for $3.72 billion. The information came into the public domain on May 21, 2010, when Piramal Enterprises informed the stock exchanges about the deal. While the information, which SEBI classifies as unpublished price-sensitive information, should have been handled on a need-to-know basis, the regulator found that Anand Piramal, Ajay Piramal’s son (who was neither employee nor director), was privy to the decision to sell at every stage.
According to Prohibition of Insider Trading Regulations, directors or officers or designated employees of a company can conduct their dealings in the securities of the company only through a valid trading window.
Additionally, they should not deal in any transaction involving the purchase or sale of the company's securities during periods when the trading window is closed, such as before disposal of a substantial portion of the business.
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