Insider Trading: Axis Bank Pays Rs41.43 Lakh while United India Insurance Pays Rs10.13 Lakh as Settlement
State-owned United India Insurance Co Ltd has paid Rs10.13 lakh to settle compliance issues with market regulator Securities and Exchange Board of India (SEBI). Axis Bank Ltd, in which United India Insurance is a promoter, also paid Rs41.43 lakh as settlement for failing to disclose insider trading within the stipulated time. In fact, SEBI found Axis Bank reported the transactions after a delay of over 1,000 days, in violation of regulation 7(2)(a) of the Prohibition of Insider Trading (PIT) regulations.  
 
SEBI issued two separate orders to settle the issues. The orders say, "...it is hereby ordered that the proceedings that may be initiated for the default....are settled qua the applicants....SEBI shall not initiate any enforcement action against the applicant for the said defaults...this order disposes of the proceedings that may be initiated for the default as mentioned....and passing this order is without prejudice to the right of SEBI to take enforcement action including commencing proceedings against the applicant..." 
 
The matter is related to United India Insurance and Axis Bank, in which the insurer is promoter. Between 1 October 2017 and 30 September 2018, the State-owned insurer traded in shares of Axis Bank, sometimes in excess of Rs10 lakh per day. As per the regulatory norms, both United India Insurance and Axis Bank were expected to report within two days from the date of transaction, the change in its shareholding in Axis Bank. 
 
However, United India Insurance disclosed five transactions after 10 to 17 days, thus violating regulation 7(2)(a) of the Prohibition of Insider Trading (PIT) regulations.
 
Axis Bank, in which the insurer is a promoter entity, was also required to disclose the transactions to stock exchange within two trading days of the receipt of the disclosure from United India Insurance. However, SEBI investigation found that Axis Bank disclosed the transactions only on 16 October 2020, a delay of 1,072 –1,080 days. 
 
On 27 January 2021, Axis Bank and United India Insurance paid Rs41.43 and Rs10.13 lakh, respectively, towards settlement of the issue.
 
Last year in January, New India Assurance Co Ltd also paid Rs62.68 lakh as settlement for violating insider trading norms in its transaction in Axis Bank shares. New India Assurance is also one of the promoters of Axis Bank. 
 
Between 28 May 2018 and 30 September 2018, the State-owned insurer traded in shares of Axis Bank, sometimes in excess of Rs10 lakh. As per the regulatory norms, New India Assurance was expected to report within two days from the date of transaction, the change in its shareholding in Axis Bank. However, New India Assurance only disclosed it on 10 June 2019, violating regulation 7(2)(a) of the PIT regulations.
 
On 29 August 2019, New India Assurance filed a suo motu application proposing to settle the delayed compliance of regulation under the PIT Regulations. 
 
On 17 December 2019, New India Assurance appeared before the internal committee of SEBI and was offered the facility of preferring the application through summary settlement procedure by paying Rs62.68 lakh within 10 days. On 23 December 2019, the insurer paid the amount to settle the matter.
 
Interestingly, New India Assurance paid the settlement amount from its shareholders’ fund but refused to divulge any information under the Right to Information (RTI) Act on whether or not this matter was discussed and approved by its board.
 
As reported by Moneylife, the insurer accepted that it did not inform the Insurance Regulatory and Development Authority (IRDAI) or the government of India about the Rs62.68 lakh settlement it made for violating insider trading norms. No wonder, there was not even an enquiry either by the IRDAI or the government about this violation and settlement. (Read: New India Assurance Settles Insider Trading Violation by Paying Rs62.68 Lakh from Shareholders’ Fund; No Action Against Any Official, Reveals RTI
 
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