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The Securities and Exchange Board of India (SEBI) has taken action against three individuals, Bijal Shah, Gopal Ritolia, and Jatin Chawla, for their involvement in insider trading activities in the shares of Zee Entertainment Enterprises Ltd (ZEEL).
The regulator has imposed a penalty of Rs. 90 lakh on them and banned them from the securities market for a period of two years. They have also been directed to pay the fine within 45 days.
According to SEBI‘s 152-page final order on Friday, Ritolia and Chawla have been directed to disgorge illegal gains to the tune of Rs. 7.52 crore and Rs. 2.09 crore, respectively, along with interest.
The case relates to insider trading activities by certain entities in the scrip of ZEEL while in possession of unpublished price sensitive information (UPSI) relating to the company’s audited financial results for the quarter ended June 30, 2020, as well as the launch of ZEEPLEX by the company on September 1, 2020.
During the relevant time, Bijal Shah was the head of the financial planning and analysis, strategy, and investor relations at ZEEL, and had access to this UPSI.
He in turn, communicated the information to Ritolia and Chawla, who traded on the basis of this information and earned profits to the tune of Rs. 7.52 crore and Rs. 2.09 crore, respectively, the Securities and Exchange Board of India (SEBI) said.
While Shah is not liable for insider trading, he has played the primary role in disclosing the UPSI to Ritolia and Chawla, which resulted in the violation of the provisions of insider trading rules.
“The allegations against the noticee Nos. 2 (Ritolia) and 3 (Chawla) for committing insider trading and against noticee no. 1 (Shah) for communicating the UPSI to Noticee Nos. 2 and 3 have been adequately established,” SEBI said.
As a result, SEBI has restrained these individuals “from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities (including units of mutual funds), directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of two years.” Additionally, a penalty of Rs. 30 lakh each has been imposed on the three individuals.
In August 2021, SEBI had passed an interim order in the matter prohibiting 14 entities, including individuals, from the securities market until further orders by and impounded illegal gains of Rs. 23.84 crore generated from insider tradings.
Later, a confirmatory order was passed by SEBI against certain entities in September 2021. Pursuant to passing of these orders, SEBI conducted an investigation to ascertain whether the acts of noticees were in violation of the provisions of the insider trading rules during the period from September 2019 to December 2020.