Zee Insider Trading Case: SEBI Bans and Imposes Rs90 Lakh Penalty on 3
Moneylife Digital Team 03 April 2023
Market regulator Securities and Exchange Board of India (SEBI) has banned three individuals for engaging in insider trading in the scrip of Zee Entertainment Enterprises (ZEEL). While imposing a penalty of Rs90 lakh on the three, SEBI also impounded 'ill-gotten' gains worth Rs7.52 crore and Rs2.09 crore from two of them.
In an order, Ananth Narayan G, whole-time member (WTM) of SEBI, says, "With respect to the quantum of penalty to be imposed against the noticee nos. 1-3, I note that while noticee no1 (Bijal Shah, former head of financial planning and analysis, strategy and investor relations at ZEEL) is not liable for insider trading, he has played the primary role in disclosing the unpublished price-sensitive information (UPSI) to noticee nos2 (Gopal Ritolia, former director of UBS India) and 3 (Jatin Chawla, ex-director of Credit Suisse and First Voyager), which resulted in the violation of the provisions of prohibition of insider trading (PIT) regulations, 2015 and the penalty to be imposed on him should be commensurate with his violations."
"I also find that for the unlawful gains made by Mr Ritolia and Mr Chawla, for their impugned trades during UPSI periods, appropriate directions of disgorgement of unlawful gains made along with interest are required to be issued. The illegal gains made by the noticees have already been impounded by SEBI in terms of interim order dated 12 August 2021 and deposited in an escrow account," the WTM says.
SEBI has barred Mr Shah, Mr Ritolia and Mr Chawla from the markets for two years while asking Mr Ritolia and Mr Chawla to disgorge Rs7.52 crore and Rs2.09 crore, respectively, with simple interest at 12%pa (per annum) from 7 September 2020.
According to the WTM, all three of them, when in possession of UPSI, which was positive, took positions in ZEEL scrip on multiple dates at varying prices, kept building them gradually and subsequently squared them off on different dates at different prices. Both Mr Ritolia and Mr Chawla used the trading accounts of their respective mothers for buying-selling the scrip of ZEEL.
Earlier in August 2021, SEBI, in an interim order, had banned 15 entities, including individuals, and also impounded 'ill-gotten' gains worth Rs23.84 crore from certain entities after finding out that they "squared off long positions and generated huge profits after first-quarter results of FY21 were announced."
However, the five individuals twice challenged the order before the securities appellate tribunal (SAT). In its second order, while setting aside the ban, it permitted impounding illegal profits. 
The investigation revealed that a group of connected or related entities had taken long positions in ZEEL around the announcement of the financial results for the first quarter of FY20-21 that were declared post-trading hours on 18 August 2020.
"They had bought a significant number of shares and / or taken long positions in the scrip of ZEEL prior to the announcement(s) and had sold the shares and / or squared off their open position in the scrip, subsequent to the announcement. In the said process, noticees had prima facie generated substantial proceeds," SEBI noted.
As the company declared a substantial increase in its profits, the scrip price surged by over 13% on 19 August 2020.
Further, Mr Shah's presence was also observed at every conference call (since the first quarter of FY19-20) conducted by ZEEL to discuss the company's financial results. It was also observed that he was in regular touch with some of the entities who were aware of the launch of the Zee Plex Service. 
The SEBI probe has discovered that as many as nine trading accounts were used for insider trading. It also noted that all the people involved used the trading accounts of their family members to avoid regulatory detection. (Read: Zee Insider Trading Case: SEBI Bans 15 Entities; Impounds Rs23.84 crore)
Free Helpline
Legal Credit