Sebi penalises Polaris promoter Arun Jain for insider trading

New Delhi: The Securities and Exchange Board of India, or Sebi, on Thursday slapped a fine of Rs.1.84 crore on Arun Jain, chairman and managing director of Polaris Software Lab Ltd, Rs.19.69 lakh on R. Srikanth, the company’s ex-chief financial officer, for allegedly making illegitimate gains through trading in shares of the company while in the possession of unpublished price sensitive information in 2008.

The order came after Sebi, on receiving an alert from the National Stock Exchange Ltd, conducted an investigation into the stock movement of Polaris between 21 April 2008 and 31 July 2008 to check for any possible violation of insider trading norms by the two individuals.

The Sebi probe reportedly found Jain and Srikanth had traded in the shares of the company during the investigation period while being privy to the company’s price-sensitive information then.

An order passed by Sebi whole-time member Prashant Saran said Jain and Srikanth had unpublished information regarding the company’s draft quarterly results that had originated on 7 July 2008 and remained unpublished till 17 July 2008.

During the investigation, Sebi found that purchases by Jain were made through market transactions, prior to the board meeting of Polaris held on 17 July 2008.

According to Sebi, Jain made a notional profit of Rs.98.11 lakh and Srikanth made Rs.10.46 lakh while trading in the company’s stock. As the alleged gains were made during 2008, Sebi levied an interest at 12% simple interest per annum on the notional profit amounts made by the two, while calculating the required penalties.

Following the Sebi order, Jain denied the charges and said in an email, “(with) reference to the news item of today regarding an ex parte interim order passed by Sebi on 24 November against me, it is clarified that the matter pertains to a set of facts of 2008 pursuant to which an investigation was conducted. Based on conjecture, Sebi has concluded that the trades were made while in possession of unpublished price sensitive information.”

“The interim order by its very nature is not a conclusive finding. As I am keen to have this matter resolved at the earliest, I would be taking all steps as legally advised to defend myself against the serious harm to reputation caused by this order, including by contesting vigorously the contents and conclusions drawn by Sebi. The allegations are clearly denied and I am confident that upon appreciation of the robust defence that would be put up, they would be dropped,” Jain said.

“Meanwhile, to demonstrate bonafides, the amount asked to be deposited by Sebi has been deposited under protest,” Jain added.