Reliance Industries, one of India’s most pervasive business behemoths, have been fined ₹30 lakhs ($38,522) by the Securities and Exchange Board of India (SEBI) for allegedly violating Prohibition of Insider Trading (PIT) regulations.
Two of Reliance’s compliance officers, Savithri Parekh and K Sethuraman, have been included in the imposed penalty as well. SEBI, India’s market regulator, imposed the fine on Reliance for failing to promptly disclose the $5.7 billion investment of social media titan Facebook into Reliance’s Jio Platforms in April 2020.
Other media outlets such as the Financial Times had already reported about the deal before the investment, which prompted Reliance’s shares to rise by 15%. This made it fall under unpublished price sensitive information (UPSI). Reliance failed to disclose or clarify the investment later on, and stock exchanges did not seek any clarification from Reliance either.
According to SEBI, it was “incumbent” on Reliance to clarify Facebook’s multi-million-dollar investment to buy a stake of 9.99% in Jio when it learned that the information was about to be published. The deal was worth ₹43, 574 crores. With the investment, the popular messaging service WhatsApp was allowed to offer payment services to millions of small businesses. According to SEBI, this deal helped Reliance to reduce its heavy debt load.
Other companies, Silver Lake and Vista Equity, had also made investments in Jio for stakes. Silver Lake put in ₹5,655 crores in Jio Platforms for a 1.15 % stake, while Vista Equity invested ₹11,367 crores for a stake of 2.32%.
SEBI said that there was a lack of quantifiable figures that would assess the disproportionate gain or unfair advantage made as a result of the defaults by the noticees. It said that the notices (Reliance, Parekh, and Sethuraman) failed to comply with the provisions of principles of fair disclosure of UPSI.
It states that there should be “prompt dissemination of unpublished price sensitive information that gets disclosed selectively, inadvertently or otherwise to make such information generally available and did not issue any clarification on the same, as required under Regulation 30(11) of SEBI (LODR) Regulations, 2015 which states that the listed entity may on its initiative also, confirm or deny any reported event or information to stock exchanges.”