Mumbai: The Securities and Exchange Board of India (Sebi) has banned Future Group founder Kishore Biyani, his brother Anil Biyani and Future Corporate Resources Ltd (FCRL) from accessing the securities market for one year for indulging in alleged insider trading activity in the shares of Ltd (FRL) in 2017.
The Sebi order has explicitly excluded any deal that’s awaiting approval, which means that it won’t pertain to the proposed sale of Future’s retail assets to Reliance Retail.
“Debarment/restraint/freeze imposed under this order shall not apply to those existing holding of securities of such debarred entities, in respect of which any scheme of arrangement under Section 230-232 of the Companies Act, 2013, is approved by NCLT, requiring extinguishment of such securities and/or receipt of other securities in lieu of such securities,” the Sebi order said on Wednesday.
Future Group has approached the National Company Law Tribunal (NCLT) for approval of the Future-Reliance deal, which has already been okayed by Sebi and the Competition Commission of India but has been held up in court and arbitration owing to a challenge by Amazon.
A Future Group spokesperson did not respond to queries. The Securities Appellate Tribunal (SAT) can be moved against Sebi orders.
The regulator also barred the Biyani brothers and FCRL from buying, selling or dealing in the shares of FRL directly or indirectly for two years and imposed a penalty of Rs 1 crore on each of them. Sebi has also directed the three to “disgorge” Rs 17.78 crore along with 12% interest.
The case relates to the regulator’s investigation into possible insider trading in FRL stock between March 10 and April 20, 2017. Sebi said FRL had on April 20, 2017, informed stock exchanges during market hours about the scheme of arrangement among FRL, Bluerock eServices Pvt Ltd and Praxis Home Retail Pvt Ltd.
The scheme of arrangement resulted in the demerger of certain business of FRL. The announcement also had a positive impact on FRL shares, Sebi said.
The regulator said the chronology obtained from the company showed that information on the demerger emerged on March 10, 2017, as preliminary discussions on the proposed demerger took place on this date. Subsequently, a team was created by FRL to work on the scheme.
The period of unpublished price sensitive information (UPSI) was thus identified as March 10 to April 20, 2017. The investigation showed that the Biyani brothers, FCRL and the FCRL Employee Welfare Trust traded FRL stock during this period.
Sebi said FCRL was part of the promoter group of FRL. Kishore Biyani, promoter of FRL, was also director of FCRL. Anil Biyani, being chairman and managing director of FRL during the investigation period, was a connected person, the regulator said.
“From the KYC (know your client) document provided by Indiabulls (stock broker), investigation observed that the trading account of noticee no. 1 (FCRL) with Indiabulls was opened on March 27, 2017, by noticee no. 2 (Kishore Biyani) and noticee no. 3. (Anil Biyani),” Sebi said in its order. “Subsequently, trading by noticee no. 1 in the scrip of FRL was done on March 29, 2017, and March 30, 2017, which was just after the account opening and just prior to the announcement dated April 20, 2017.”