Bar on hedge fund in L&T Fin insider trading case

Unearthing a major insider trading case in shares of Land T Finance, the Securities and Exchange Board of India, on Thursday, barred a Cayman Islands-based hedge fund from Indian securities markets, while the role of other entities, including some employees of investment banking major Credit Suisse, are also under scanner. This hedge fund, Factorial Master Fund, traded in derivative contracts of Land T Finance with Offshore Derivative Contracts (commonly known as P-Notes) through five different FIIs (foreign institutional investors) — namely Macquarie Bank, Goldman Sachs Singapore, Merrill Lynch CM Espana, Nomura Singapore and Citigroup Global Markets Mauritius Limited — in an ‘aberrant and suspicious’ manner. Besides, a probe by the capital markets regulator found that Factorial was involved as potential investor in the market gauging exercise undertaken by Credit Suisse as ‘Seller Broker’ of Land T Finance for its offer for sale (OFS) in March. The order does not affect Land T Finance or its promoters as such. Prima facie guilty Finding Factorial prima facie guilty of having violated various regulations, including those for prevention of insider trading and prevention of fraudulent and unfair trade practices, SEBI said the fund traded on the basis of its access to ‘unpublished price sensitive information’ (UPSI). It, however, added that the entire channel for flow of ‘unpublished price sensitive information’ in this case needs to be further investigated. “It may be mentioned in this regard that as per its submissions, investment banking team of Credit Suisse had contacted Factorial in relation to the OFS of Land T Finance. The fund has been asked to file its reply, if any, to SEBI within 21 days. — PTI