Market regulator Sebi has imposed penalties totalling Rs 13 lakh on two former executives of Wockhardt for flouting insider trading norms.
The regulator has slapped a fine of Rs 12 lakh on Yatendra Kumar and Rs 1 lakh on Shashi Kant Tiwari.
The order came after Sebi conducted an investigation into the trading activity in the scrip of Wockhardt for the January 2012 to August 2013 period to ascertain any violation of the provision of insider trading rules.
In its 35-page order on Monday, Sebi found that Kumar was an insider who had traded in the scrip of Wockhardt while having Unpublished Price Sensitive Information (UPSI), regarding issuance of Form 483 by the US Food and Drug Administration (USFDA) to Wockhardt’s manufacturing facility in Waluj in Maharashtra.
Form 483 contains FDA’s observation in detail and is issued if USFDA finds objectionable conditions upon completion of inspection of facilities. The issuance of such a form is regarded as adverse observations. Unless rectified, it may ultimately lead to issuance or warning and import alert, which have financial implications for the concerned company.
Going by the order, the USFDA issued Form 483 to Wockhardt on March 22, 2013, which was price sensitive information, and the drug firm made the information public on April 15 of the same year by issuing a press release on its website.
Thus, the period from March 22 April 15, 2013 was considered a period of UPSI.
Kumar, who was holding the post of President Pharma Research, Global IP, Quality Assurance/Quality Control and Regulatory Affairs at Wockhardt, traded in the company’s shares while in possession of UPSI and thus, avoided the illegal loss of Rs 14.23 lakh, and benefitted from selling the shares while having UPSI.
The regulator also observed that Kumar was required to have his trades pre-cleared before trading in the scrip of Wockhardt. However, no such pre-clearance was sought by him, thereby flouting the insider trading rules, as per Sebi.
“I note that provision VIII-3 of code of conduct (stipulated by Wockhardt) prohibited designated employees from entering into opposite transaction in shares of the company within a period of 6 months,” Sebi’s Adjudicating Officer Vijayant Kumar Verma said in the order.
In the present case, it has been admitted position that Kumar had bought and sold 500 shares of Wockhardt on March 12, 2013. He did not disclose the buy side of this trade on March 12, 2013 to the company, the order said.
Further, Tiwari who was also a designated employee (General Manager, Analytical development, Wockhardt Research Centre), during the investigation period had bought 380 shares of the company on December 13, 2012 and sold 943 shares on April 4, 2013, Verma said.
Therefore, Kumar and Tiwari had reversed their position in Wockhardt shares within a period of six months and violated provision VIII-3 of code of conduct.
In June, Sebi barred Yatendra Kumar from the securities market for six months and directed him to disgorge losses of over Rs 14 lakh averted by flouting insider trading rules in the same matter.
He was also restrained from buying, selling or dealing in the securities of Wockhardt Ltd for one year.
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