Team siliconindia

• Sebi fined Rupesh Satish Dalal HUF Rs 10 lakh for trading HDFC shares using unpublished merger information.
• The information was accessed through Dalal’s son, who was in close contact with a Deloitte insider involved in the merger valuation.
• Trades were made on April 1, 2022, and exited immediately after the merger announcement on April 4, confirming violation of insider trading rules.

The Securities and Exchange Board of India (Sebi) imposed a penalty of Rs 10 lakh on Rupesh Satish Dalal HUF for trading in the shares of HDFC Ltd and HDFC Bank while in possession of unpublished price sensitive information (UPSI) related to their merger.

The violation took place just days before the official announcement of the merger between HDFC Ltd and HDFC Bank on April 4, 2022. Sebi's investigation found that the entity, represented by karta Rupesh Satish Dalal, executed trades in derivatives of both HDFC entities on April 1, 2022, based on UPSI.

According to the probe, the UPSI was accessed through Dalal’s son, who was in close and regular contact with a person associated with Deloitte Touche Tohmatsu India LLP the valuation firm appointed for the merger. The individual from Deloitte, part of the valuation team from March 29, 2022, was a long-time friend of Dalal’s son. They reportedly exchanged several phone calls in the lead-up to the trades and met in person on March 31, a day before the trades were executed.

Sebi stated that Rupesh Satish Dalal HUF purchased multiple call option contracts of HDFC Ltd and HDFC Bank Ltd on April 1, 2022, while in possession of UPSI. The entity exited these positions immediately after the merger was announced on April 4, 2022.

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This activity was flagged by the National Stock Exchange (NSE) during its routine surveillance of trading patterns between November 1, 2021, and April 30, 2022. The suspicious trading was forwarded to Sebi for further investigation.

The regulator concluded that the entity had violated the Prohibition of Insider Trading (PIT) regulations by profiting from confidential merger information before it was made public.

It’s worth noting that in December last year, two individuals including a former Deloitte India employee settled a similar insider trading case related to the same merger by paying a settlement fee of Rs 74 lakh.