Manappuram Finance: SEBI disposes of insider trading charges against Kotak Mahindra Life Insurance

SEBI said Kotak was not in a position to know that the information that was distributed in the research report or discussed in the conference call or being covered by media is UPSI. New Delhi Markets regulator SEBI on Tuesday disposed of insider trading charges against Kotak Mahindra Life Insurance Company in the matter of Manappuram Finance. It was alleged that Kotak Mahindra Life Insurance Company (earlier known as Kotak Mahindra Old Mutual Life Insurance) sold shares of Manappuram Finance Limited (MFL) while in possession of unpublished price sensitive information (UPSI) about the company and thereby violated insider trading norms. SEBI, pursuant to investigation in the matter of selective disclosure of UPSI by MFL, observed that Kotak had sold its shares while allegedly in possession of UPSI during 1-20 March 2013 and allegedly violated PIT (Prohibition of Insider Trading) Regulations. SEBI noted that officials of MFL met Ambit Capital Private Limited s research analysts on 18 March 2013 to seek market guidance about the quarterly results and future outlook. Ambit published a research report based on the meeting which was distributed to its clients (broking as well as research) on 19 March 2013 before the market opening hours. In the research report, Ambit had changed its rating of MFL's stock from 'buy' to 'under review.' Ambit published the report based on the meeting which was distributed to its clients (broking as well as research) on 19 March 2013 before the market opening hours. The information of negative profit for the fourth quarter of FY2012-13, which is deemed to be price sensitive information, was disclosed to the stock exchanges by MFL on 20 March 2013 after market hours and the information was already in the public domain before that. SEBI said Kotak was not in a position to know that the information that was distributed in the research report or discussed in the conference call or being covered by media is UPSI. The transactions of Kotak was purely from the point of view of the individual holding life insurance policies issued by the company, and selling of the scrip of MFL during that time was necessary to avoid significant loss to the policy holders in the scheme, since the price of the scrip was rapidly falling after the research report was issued in the morning of 19 March 2013, it added. "It may be noted that the noticee (Kotak) is bound by its fiduciary responsibility with the policy holders to act in their best interest," SEBI said. "I do not find a reasonable and acceptable degree of probability towards proving beyond doubt or even, without existence of significant doubt that Noticee (Kotak) had traded in the scrip of MFL when in possession of UPSI and hence, the allegation of violation of...PIT Regulations...does not stand established," SEBI adjudicating officer Vijayant Kumar Verma said while disposing of the show cause notice without any penalty. Earlier, SEBI had disposed of insider trading allegations against four mutual fund houses -- SBI Funds Management, Aditya Birla Sunlife AMC, IDFC Asset Management Company and BNP Paribas Asset Management -- in the same matter.