SEBI Bans Two Individuals, Including Jagsonpal Pharma CFO, for 1 Year Insider Trading

SEBI, the Securities and Exchange Board of India, recently issued a ban against Maneesh Kumar Jain and SV Subha Rao, the former chief finance officer of Jagsonpal Pharmaceuticals, in an insider trading case. Both individuals are barred from the markets for one year and have been fined Rs25 lakhs for their involvement in insider trading related to Jagsonpal Pharmaceuticals scrip. Additionally, Mr. Jain has been directed to disgorge Rs31.39 lakhs along with 12% penal interest from 22 February 2022 until the date he deposits the amount.

The issue arose when on 22 February 2022, Jagsonpal Pharmaceuticals announced an open offer for shares priced at Rs235 per share, totaling Rs160.07 crore. This disclosure occurred pre-market at 7:09 am and led to a notable increase in the company’s stock price. The stock climbed from Rs205.40 on 21 February to Rs246.45, marking a 20% hike and reaching a new 52-week high.

SEBI’s investigation revealed that the unpublished price sensitive information (UPSI) period lasted from 28 December 2021, when Jagsonpal Pharma signed a non-disclosure agreement with Convergent Finance LLP, until 21 February 2022. Stock prices during this time period fluctuated significantly, rising from Rs160.30 on 24 December 2021 to Rs227.55 by 21 February 2022. These movements indicated strong market reactions to the information, suggesting the presence of UPSI.

Mr. Rao, as the CFO, had access to this sensitive information and participated in acquisition discussions. His role in compiling event details and conversing with Mr. Jain, who made trades following these discussions, was pivotal in the investigation. Despite Mr. Jain initially denying any ties to insiders at Jagsonpal Pharmaceuticals and claiming his trades were based on independent market analysis, SEBI found that his transactions during the UPSI period were highly irregular. He purchased 102,000 shares at an average price of Rs210.69, later selling them post-announcement at an average price of Rs241.46, resulting in a profit of Rs31.39 lakhs.

SEBI concluded that Mr. Jain acted on insider information provided by Mr. Rao due to the unusual trading activity in this specific stock compared to his historical trading patterns. Mr. Jain was fined Rs15 lakhs, and Mr. Rao was fined Rs10 lakhs by the market regulator for their involvement in insider trading.