SEBI fines Rupesh Satish Dalal for insider trading during HDFC merger
He received price-sensitive information from his son through an insider at Deloitte, the valuation firm involved in the fusion
The Securities and Exchange Board of India (SEBI) has imposed Rs.10 lakh on Rupesh Satish Dalal (Hindu Undivided Family) for trading in the shares of HDFC Ltd and HDFC Bank while possessing unpublished price sensitive information (UPSI) on their merger.
He traded in derivatives of HDFC Ltd and HDFC Bank on 1 April 2022, days before the official announcement of their merger on 4 April 2022.
SEBI’s probe revealed that Dalal, the karta (senior-most male member, managing the family’s affairs and property) of Rupesh Satish Dalal, received UPSI through his son. The junior Dalal was in close and regular contact with an insider associated with Deloitte Touche Tohmatsu India LLP.
Deloitte was engaged as the valuer for the merger and the individual was part of the valuation team from 29 March 2022. He and Dalal’s son were long-time friends and exchanged several calls in the run-up to the trades. The regulator noted that a day before Dalal placed the trades, a meeting took place between the two on 31 March.
SEBI claimed that the noticee (senior Dalal) bought multiple call option contracts of HDFC. Once the information of the impending merger was disclosed, he immediately exited his position. Thus, it was established that he violated the SEBI Prohibition of Insider Trading Regulations, 2015.
The regulator’s order came after the National Stock Exchange (NSE) analysed the trading activity of various entities in the scrip of HDFC. The bourse observed that the trading of certain clients, including Dalal, pointed to the possibility of trading on UPSI basis. It forwarded the matter (1 November 2021 to 30 April 2022) to the watchdog.
Meanwhile, in December last, two individuals, including a former employee of Deloitte India, settled a case with SEBI on the alleged violation of insider trading rules by paying Rs.74 lakh.