Why Sebi barred CEO of Poonawalla Fincorp

Bhutada, who knew about the deal, used the information to tell other parties to buy shares and futures for Magma Fincorp resulting in unlawful gains to the tune of Rs 13.58 crore, which have been impounded by the regulator.

The market regulator said that a preliminary examination was started in February after its system for tracking insider trading pinged alerts for Magma Fincorp. Abhay Bhutada, Saumil Shah, Surabhi Kishore Shah, Amit Agrawal, Murlidhar Bagranglal Agrawal, Rakesh Rajendra Bhojgadhiya, Rakesh Rajendra Bhojgadhiya HUF, and Abhijit Pawar were investigated.

The probe revealed that Bhutada, who was employed at a senior position in the company and had sensitive information, was connected to the individuals being investigated — Saumil Shah, Rakesh Rajendra Bhojgadhiya, and Abhijit Pawar.

Connections between Bhojgadhiya and Amit Agarwal were also established. Saumil Shah had a family and financial relationship with Surabhi Kishore Shah and Amit Agrawal had a family and financial relationship with Murlidhar Bagranglal Agrawal.

“It is noticed that there were phone calls amongst the entities during the relevant period and the said phone calls were followed by transfer of funds. Further, it is also noticed that persons enjoying connection through phone calls, fund transfers, etc. have traded in the scrip of Magma in advance of the afore-mentioned event i.e. disclosure of the corporate announcement,” Sebi said in the order.

The accused have been barred from the securities market, directed to close any open positions or calls within three months from the date of the order.

They have been held jointly liable for Rs 13.58 crore — the amount held by the Sebi to be unlawfully acquired by them due to insider information.

Bhutada, Bhojgadhiyan, Rakesh Rajendra Bhojgadhiya HUF, and Abhijit Pawar are jointly liable for Rs 8.3 crore. While Amit Agrawal, Murlidhar Bagranglal Agrawal, and Bhojgadhiya are jointly liable for Rs 3.5 crore, and Saumil Shah and Surabhi Kishore Shah are together liable for Rs 1.76 crore.

The amount needs to be deposited into an escrow account within 15 days of the order.

The incident at Magma Fincorp, which was later renamed Poonawalla Fincorp, is the latest high-profile case of insider trading this year. Earlier this year, eight entities were fined and barred from the securities market for trading with insider information on Infosys Pvt Ltd.