Fraudulent Trading: RIL Banned From Dealing In Equity Derivatives For 1 Year, Fined Rs 1,000 Cr

The Securities and Exchange Board of India (SEBI) has barred 13 companies, including Reliance Industries Limited (RIL), from dealing in equity derivatives in the Futures and Options (F&O) segment of stock exchanges, directly or indirectly, for a period of one year.

The SEBI has also directed RIL to deposit Rs. 447.47 crore within 45 days. The board also directed to charge 12 per cent interest on the amount of Rs. 447.47 crore from the date of 29 November, 2007, considered to be the biggest penalty in insider trading. This itself will amount to more than Rs 500 crore taking the total penalty to about Rs 1,000 crore.

Following are the points mentioned in the SEBI order:

(i) The noticees named above shall be prohibited from dealing in equity derivatives in the F&O segment of stock exchanges, directly or indirectly, for a period of one year from the date of this order. The noticees may, however, square off or close out their existing open positions.

(ii) Noticee No. 1 (Reliance Industries) hall disgorge an amount of Rs. 447.27 crore, as ascertained in para No. 5.5 above along with interest calculated at the rate of 12 percent per annum November 29, 2007 onwards, till the date of payment.

(iii) Noticee No. 1 shall pay the said amounts within 45 days from the date of this Order either by way of demand draft drawn in favour of "Securities and Exchange Board of India", payable at Mumbai or by e-payment to SEBI account.

Earlier in March 2007, the Board of Directors of Noticee No. 1 decided to raise resources by off- loading approximately five per cent of its holdings of equity shares of the scrip Reliance Petroleum Limited (RPL).

While RIL undertook the transactions in the cash segment of RPL in November 2007, it enlisted the services of other 12 companies (that have also been debarred) as agents to operate in its behalf in the futures segment of RPL. Between 1 November, 2007 and 6 November, 2007 these 12 entities took substantial positions in the November Futures contract of RPL.

On 6 November, 2007, eventually, the holding in derivatives contracts RPL reached 95 per cent of the market-wide position limit (MWPL), thereby, inviting upon it a restriction of no further increase in open interest (OI) position as per extant rules pertaining to trading in the derivative segment. This led to an investigation by SEBI into the matter.

Prior to the said SCN, there was another SCN dated 29 April, 2009 issued to RIL, which was modified subsequently by corrigendum dated 8 October, 2009, both of which were superseded by the SCN dated 16 December, 2010.

Via ANI.