By IANS,
Chennai : Expressing shock and surprise at SEBI barring him from the securities market for two years on charges of insider trading, Polaris Financial Technologies Ltd CMD Arun Jain Wednesday said he will be approaching the Securities Appellate Tribunal (SAT) in appeal.
“I will be appealing against the decision. It is shocking and surprising. I thought the matter was closed way back in 2008 when I paid Rs.700,000 towards settling the same charges in SEBI adjudication,” Jain told IANS.
Jain made the settlement in response to a show cause notice issued by the stock market regulator in 2005 under Section 15G of Securities and Exchange Board of India (SEBI) Act.
“In 2008 before SEBI’s High Powered Advisory Committee, the issue was settled for Rs.700,000. If a matter settled before a high powered committee and approved by two whole time members of the SEBI Board could be reopened more than three years later, then what is the purpose of calling the committee a high powered one,” Jain wondered.
SEBI’s whole time member Rajeev Kumar Agarwal Tuesday banned Jain from accessing the securities market for two years on the matter that dates back to 2000.
SEBI, which sent a show cause notice to Jain under Sections 11 and 11B of SEBI Act last December, decided on the issue Tuesday.
In his order, Agarwal said: “The violations occurred in the year 2000 and pursuant to investigations enforcement actions were decided in 2005.
“In my view, insider trading particularly by the chairman and managing director should be dealt with severely. I note for this reason, it was contemplated to initiate multiple proceedings against the notice (Jain) in 2005.”
On receipt of first show cause notice in 2005, Jain had filed a writ petition in the Madras High Court to quash it.
The case was dismissed by the court in June 2008 after Jain paid Rs.700,000 as per terms of the consent order.
“I was not aware of SEBI contemplating any multiple proceedings in 2005. Had I known that I would have included the same in my writ petition. The contents of Tuesday’s SEBI order is surprising,” Jain said.
Agreeing that competition might take advantage of his current predicament at the market place, Jain said his marketing team is capable of handle any such negative publicity.
“The latest decision is negative for the industry. Nowhere in the world a regulator would open the same matter that was settled several years back,” Jain said.
The case dates back to May 2000 when Polaris decided to acquire a US based company Data Inc for $21 million. Highlighting serious discrepancies with regard to the proposed acquisition, the due diligence auditors submitted their report to Polaris Aug 7, 2000.
According to SEBI’s Tuesday order, Polaris had undertaken the process of acquisition of Data Inc under the `Fast Track’ route prescribed by the Reserve Bank of India (RBI) under which the acquisition had to be completed within 90 days – by Aug 23, 2000.
Polaris informed the public about cancelling the acquisition Sep 30, 2000 following which stock prices went down.
According to SEBI, Polaris was holding price sensitive information till Sep 30, 2000 as it knew that the proposed acquisition was not in the interest of shareholders and it was not likely to be completed by Aug 23, 2000.
Meanwhile Jain had asked his stock broker to sell 15,080 shares of Polaris between Aug 23, 2000 and Sep 19, 2000 thereby attracting SEBI’s action for insider trading. The shares were held by private entity Polaris Holding Private Ltd (PHPL), which at that point of time held 36 percent stake in Polaris.
According to SEBI, Jain had an unfair gain of around Rs.2.7 million. It sent him its first show cause notice in 2005 which was latter settled paying Rs.700,000.
As on date, PHPL and Jain’s family owns 28,989,559 shares in Polaris.
Jain has not been taking any salary from Polaris for the past two years saying that he is getting a dividend that is sufficient for his family.