SEBI imposes Rs 1 cr penalty on ex-Adlabs chief Shetty
The Securities and Exchange Board of India (Sebi) has slapped a penalty of Rs 10000000 on Manmohan Shetty,well-known film producer and former chairman of media company Adlabs Films,for allegedly violating SEBIs insider trading norms in 2006. Shetty was accused of selling shares of Adlabs which was later taken over by the Anil Ambani group and rechristened Reliance MediaWorks within 24 hours of making public the information on demerger of the FM radio business from Adlabs,thereby violating Sebi’s insider trading norms. According to SEBI’s charges,information on Adlabs board’s decision on demerger of FM radio business was sent by the company to the National Stock Exchange and the Bombay Stock Exchange on April 24,2006. However,Shetty,SEBI alleged,sold 1000000 shares of Adlabs Films on the same day through a bulk deal. The former Adlabs chairman contested SEBIs arguments saying the sale of shares on April 24,2006 was well after information had been widely disseminated and the market had enough time to absorb the news and its impact. Shetty informed the regulator that the sale of Adlabs shares by him within the expiry of 24 hours of the decision of the board meeting made public was purely an inadvertent and technical error on his part without any malafide intention. But Sebi said Shetty benefited by selling the shares at that time and imposed the penalty. Shetty sold the shares at an average rate of Rs 402.60 on BSE on April 24,2006 and total market volume was 18.3900000 shares,including 1000000 shares sold by him,Sebi said. The closing price on April 24,2006 was Rs 409.14,the market regulator said,adding Shetty informed that these shares were alloted to him at Rs 5 a share. It is observed that the closing price of the shares on the next day April 25,2006 had gone down to Rs 393.63,Sebi said. The consent application was,however,rejected by Sebi. Manmohan Shetty set up Adlabs in 1978 in partnership with Vasanji Mamania. The company which was initially into processing advertising films later started processing motion pictures. The company went public in 2000 and expanded into the exhibition business which was headed by Puja Shetty. The Anil Ambani group bought a controlling stake in the company in August 2005.