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Sun Pharma’s senior exec, wife settle insider trading case with Sebi

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Currently, Abhay Gandhi is CEO of Sun Pharma’s North America business.

Mumbai: Sun Pharmaceutical NSE 1.37 % Laboratories’s former chief executive Abhay Gandhi and his wife Kiran have settled insider trading case with market regulator Sebi by paying a total of Rs 70 lakh as settlement charges. Sun Pharma Laboratories is a wholly-owned subsidiary of Sun Pharma. Currently, Gandhi is CEO of Sun Pharma’s North America business.

Sun Pharma in an email response to ET said that it is pleased that the matter of Mr Abhay Gandhi and his spouse has been brought to a closure and the company has full faith that Mr Gandhi conducts himself with the utmost integrity in any situation.

The case relates to their trading in shares of Ranbaxy Laboratories NSE 5.63 % in 2014. In July 2013, Sun Pharma first approached Daiichi Sankyo, the promoters of Ranbaxy for acquiring it.

“There were emails sent by Sun Pharma’s advisors to Daiichi during September to November 2013.It was also observed that during the period January 2014 to February 2014,several emails were exchanged between the advisors of Sun Pharma and Daiichi and the same resulted in Daiichi forwarding the proposal of Sun Pharma to Daiichi’s advisor,” Sebi said in its order on Thursday.

Subsequently, Daiichi had sought the time lines from Sun Pharma to finalise the deal.The major aspect in this deal was the agreement of Daiichi to consider any sort of transaction.

“As the majority shareholder in control of the ownership and management of Ranbaxy, no transaction whatsoever could have taken place without Daiichi’s acquiescence. Daiichi after considering the January 31, 2014 presentation forwarded by Sun Pharma, meeting with Daiichi’s and Sun Pharma’s Advisors on February 11, 2014 and appointment of Goldman as financial advisor on February 13, 2014, had asked for timelines for the closure of the deal on February 14, 2014. From this it is inferred that, Daiichi has agreed to the proposal of the Sun Pharma on February 14, 2014,” Sebi said.

The regulator said the information that Daiichi has agreed to Sun Pharma’s proposal to acquire Ranbaxy was price sensitive information(PSI). The PSI came into existence February 14,2014 and the same was made public on April 7,2014 before the start of the trading hours.

Therefore, the unpublished price sensitive information(UPSI) period was from February 14,2014 to April 6,2014, Sebi said. As Gandhi was then the chief of Sun Pharma Laboratories, he and his wife were insiders under Sebi rules.

According to two separate orders, they had traded in the shares of Ranbaxy when the proposed deal was yet to be made public. Gandhi and his wife traded in 454 shares and 6,770 shares, respectively, during the UPSI period.

The regulator said trading in the scrip of Ranbaxy Laboratories, that is buying during the UPSI and selling immediately after the the UPSI was made public by both of them was in violation of its insider trading rules.

“This settlement was based on certain formula where the accused parties decided not to indulge in lengthy litigation. Here the regulators looked at whether the matter could be settled under the settlement regulation or not. Basically when the regulators are investigating a insider trading case, they look at whether that insider trading has a market wide impact or not”, according to a senior official who is aware of the details of the case who did not wish to be quoted.”If such an insider trading does not have market impact then the issue is settleable. This is what the individuals have done. Sun Pharma does follow a governance code that SEBI has prescribed for all listed companies. In fact in this case, Sun was not party to it at all”, this official added.

An email sent to Sumit Agrawal of RegStreet Law who represented Kiran Abhay Gandhi remained un answered.

Sun told ET that the company has “Code of Internal Procedures and Code of Conduct for Prevention of Insider Trading” which stipulates that any employee in possession of unpublished price sensitive information cannot trade in the Company’s shares. Any employee who is not in possession of unpublished price sensitive information and has traded in the Company’s shares has to intimate the Company if the transaction is beyond a certain limit.

The company also explained that as per its “Global Code of Conduct”, every employee is required to abstain from trading in, or recommending the purchase or sale of securities of any other company of which they have obtained material non-public information as a result of their employment by or ailiation with Sun Pharma.