Sebi had barred former chief exec from the securities markets in May
Mumbai: IndusInd Bank’s former chief executive Sumant Kathpalia has proposed to settle the insider trading case against him with the Securities and Exchange Board of India (Sebi). He has proposed ₹5.21 crore as settlement charges to the regulator, according to documents reviewed by ET.
The settlement mechanism is an out-of-court agreement that allows those involved in regulatory breaches to settle cases without admitting or denying guilt by paying a fee. Kathpalia and Sebi didn’t respond to queries.
Sebi had through an interim ex-parte order on May 8 barred Kathpalia, former deputy CEO Arun Khurana and three other executives of the bank from trading in the securities market over allegations of insider trading related to accounting discrepancies that they knew about more than a year before they were revealed to other shareholders and the public.
This was probably the first time the regulator had banned a bank’s CEO from the securities market for indulging in insider trading. On May 28, the regulator issued a show-cause notice to Kathpalia asking why action should not be taken on him for violating insider trading rules.
“Sebi settlement regulations allow even serious violations, including those with global ramifications, to be considered for resolution. Even instances where an individual deceives a bank or MF are not excluded from scope of settlement,” said Sumit Agrawal, senior partner, Regstreet Law Advisors.
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But the assessment of whether a violation has market-wide impact, caused losses to a large number of investors or affected the integrity of the market… often depends on the discretion of the whole-time members in charge at the time, he said. “This discretionary approach lacks transparency,” Agrawal said.
In his settlement application filed on July 26 with the regulator, Kathpalia pledged to keep the order confidential. “I shall not take action or make or permit to be made public statement denying, directly or indirectly, any finding of the board including that recorded in the settlement order or creating impression that the settlement order is without factual basis,” according to the document that ET has reviewed.
The regulator has impounded a total of about ₹19.8 crore from the five individuals in recompense for notional gains made from the unpublished price sensitive information they were in possession of. Sebi had asked Kathpalia to return ₹5.2 crore of unlawful gains made.
The regulator conducted a suo motu preliminary examination after the IndusInd Bank stock plunged on March 10 following its announcement about the accounting matter.