The Securities and Exchange Board of India has fined Piramal Enterprises and five senior officials of the firm including Ajay and Swati Piramal for breaching insider trading rules regarding the sale of its domestic healthcare business to Abbott Laboratories.
The regulator has suspects that the directors of the company did not handle the transaction appropriately as Anand Piramal, son of Ajay Piramal who is neither an employee nor director was informed about the decision at every stage. Also, the company and its directors did not pronounce the compulsory closure of trading window, which allowed one of its employees to trade in the stock. The regulator has inflicted a fine of Rs 6 lakhs on them.
Piramal Enterprises share price opened below its previous close price today owing to the news.In May 2010, Piramal Enterprises Ltd, previously known as Piramal Healthcare sold its domestic healthcare business to Abbott Laboratories for $3.72 billion.
On Monday SEBI posted an order on its website stating that it is essential to ensure that UPSI (unpublished price sensitive information) is shared strictly on a need to know basis and not communicated to the ones who are not involved in the transaction regardless of their position in the company or relationship with promoters and senior management.
Thus, the notices i.e. company and five senior officials failed to implement discretion and due diligence and should have avoided sharing of information concerning to the proposed sale with Anand Piramal who is neither a director nor an employee of the company.
The regulator also alleged that the company and its officials failed to declare the closure of trading window on account of the information concerning to the sale of the domestic business to Abbott. As per Sebi rules, the trading window is required to be closed at the time of the sale of business units.
However, Piramal Enterprises share price hardly witnessed any effect of the fine on its trading. The stock is currently trading at Rs. 1,890.10 with the slippage of 1.14%.
The company tried to clarify before the regulator that the closure of trading window by it preceding any commercial agreement being reached between Abbott and Piramal Enterprises would have been counter-productive and may have negatively affected the interests of the investors by leading to the conception of the false market and causing excessive speculation in the market.
Sebi, however, stated that since the strategic sale was price sensitive information, the trading window should have been closed to avoid transactions by directors and employees.
The responsibility is on the company to decide about the initiation of closure of trading window which should be opened only 24 hours after the price sensitive information is made public.
In this case, the notice for board meeting was given on May 2 0, 2010 and the Board met on May 21, 2010, to agree to the transaction. Stock exchanges were notified about the deal on the same day.
Piramal Enterprises is the Multibagger for the month identified by Dynamic Levels. For the resistance and support levels of the stock, visit Piramal Enterprises share price forecast page of Dynamic Levels website.
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