SEBI imposes penalty worth crores on Reliance Industries Limited for ‘manipulative trading’: Details

SEBI imposes penalty worth crores on Reliance Industries Limited, Mukesh Ambani
Fines imposed for alleged manipulative trading (Images via business insider, business-standard resp.)

The Securities Exchange Board of India (SEBI) imposed penalty to the tune of Rs 75 crore on several entities including Reliance Industries Limited (RIL) and its Chairman and Managing Director Mukesh Ambani for alleged manipulative trading. Passing an order on January 1, the SEBI levied fines worth Rs 25 crore on RIL, Rs 15 crore on Mukesh Ambani, Rs 20 crore on Navi Mumbai SVZ Pvt Ltd and Rs 10 core on SEZ Ltd for manipulating trading in the shares of erstwhile Reliance Petroleum Ltd in November 2007.

The matter related to the sale and purchase of RPL shares in the cash and the futures segments in November 2007 after RIL decided to sell a 4.1 % stake in RPL in March 2007. RPL was merged in RIL in 2009. In a 95-page order, SEBI’s Adjudicating Officer BJ Dilip said, “I find it appropriate to consider the direction in the nature of debarment and the disgorgement that has already been passed against RIL as a relevant factor while deciding the quantum of penalty”. The order further read, “In the instant case, the general investors were not aware that the entity behind the above F&O segment transactions was RIL. The execution of the aforesaid fraudulent trades affected the price of the RPL securities in both cash and F&O segments and harmed the interests of other investors”.

The market regulator noted that any manipulation in the volume or price of securities impacts the investor confidence in the market when investors find themselves at the receiving end of market manipulators. It added that the execution of manipulative trades affects the price discovery system itself and has an adverse effect on the fairness, integrity and transparency of the stock market.

SEBI said that Mukesh Ambani was responsible for the manipulative activities of RIL. “Noticee-2, being the Managing Director of RIL, was responsible for the manipulative activities of RIL. I am of the view that listed companies should exhibit the highest standards of professionalism, transparency and good practices of corporate governance, which inspires confidence of the investors dealing in the capital markets. Any attempt to deviate from such standards will not only erode the confidence of the investors but also affect the integrity of the markets”, it said.

Penalty on Reliance Industries Limited by SEBI: Details of the case

In 2007, RIL sold 4.1% per cent of its shares in the RPL. In order to prevent a fall in the share price of the RPL, the equity was sold first in the futures market and later in the spot market. According to SEBI, the company was aware that there would be a sale of shares in the spot market and therefore, its sales in the futures market before that amounted to insider trading.

Last year in November, the Securities Appellate Tribunal (SAT) had dismissed a plea filed by RIL that challenged a Rs 447 crore disgorgement order passed by the SEBI. In an order dated March 24, 2017, the Whole Times Member (WTM) of SEBI directed RIL to disgorge an amount of Rs 447.27 crore along with interest calculated at the rate of 12% annually from November 29, 2007, till the date of payment. RIL was prohibited from dealing in equity derivatives in the F&O segment of stock exchanges, directly or indirectly, for a year from the date of the said order.

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