SEBI Vs. SAMIR C ARORA
LAWS(SB)-2003-9-8
SECURITIES APPELLATE TRIBUNAL
Decided on September 24,2003

Appellant
VERSUS
Respondents

JUDGEMENT

T.M.Nagarajan, - (1.) 0 Alliance Capital Mutual Fund (ACMF) is a mutual fund registered with SEBI. It has been sponsored by Alliance Capital Management Corporation of Delaware, USA, whose parent company is Alliance Capital Management LP (ACM), USA. Alliance Capital Asset Management (India) Ltd. (ACAML) is the Asset Management Company of ACMF. ACAML is the subsidiary of Alliance Capital (Mauritius) P Ltd. (ACMPL), whose parent is also ACM.
(2.) 0 During mid January 2003, various news items appeared in the print media inter alia to the effect that: a) ACM had decided to sell its stake in their Indian subsidiary. b) Shri Samir Arora, the Fund Manager of the ACMF and his Research team would exit from it. c) ACMF was facing redemption pressure. d) The Assets Under Management (AUM) of ACAML had fallen by around Rs. 1000 crores. e) The prices of certain scrips such as Balaji Telefilms Ltd. , United Phosphorous Ltd. , Hinduja TMT Ltd. , Digital Globalsoft Ltd. and Mastek Ltd. had fluctuated substantially consequent to the rumors and uncertainty created about the sale of stake of ACAML. f) ACM issued a press release on February 3, 2003 stating that they had completed the review of the strategic alternative for ACAML and they would retain their ownership in the ACMF. g) Following the decision of not pursuing the sale of stake by ACM, the prices of the aforementioned scrips bounced back. N the above backgrouNd, Securities aNd ExchaNge Board of INdia (SEBI), iN the iNterest of iNvestors, ordered oN JuNe 6, 2003, aN iNvestigatioN iNto the affairs of ACAML aNd more particularly to ascertaiN the violatioN, if aNy, of the provisioNs of the SEBI Act, Rules aNd RegulatioNs made thereuNder. 3.1 INvestigatioNs revealed that Shri Samir C Arora, Head- AsiaN EmergiNg Markets at ACMSL was takiNg all iNvestmeNt decisioNs of the equity aNd balaNced schemes of ACMF aNd was also maNagiNg the INdiaN allocatioN of AsiaN FuNds of ACM, besides allocatioNs for some other AsiaN couNtries. 3.2 IN the course of iNvestigatioNs, it traNspired that wheN ACM decided to sell its stake iN ACAML, Shri Arora had reached aN uNderstaNdiNg with HeNdersoN Global INvestors for the purchase of the stake of ACM iN ACAML aNd that his actioNs / iNactioNs seemed to have beeN calculated to briNg dowN the valuatioN of ACMF. It was fouNd that the coNduct of Shri Arora was Not iN coNsoNaNce with the high staNdards of iNtegrity, fairNess aNd professioNalism expected of a fuNd maNager. Further, the timiNg aNd maNNer of disposal of ACMF's eNtire holdiNgs iN Digital Globalsoft smacked of Shri Arora's dealiNg iN the security while iN the kNowledge of uNpublished price seNsitive iNformatioN. Thus, there was a prima facie case of iNsider tradiNg iN terms of SEBI (ProhibitioN of INsider TradiNg) RegulatioNs, 1992, by Shri Samir C Arora. It was also viewed that, Shri Arora beiNg the fuNd maNager at ACMF aNd FIIs/sub-accouNts of ACM, was respoNsible for the NoN-disclosures aNd wroNg disclosures uNder the SEBI (SubstaNtial AcquisitioN of Shares aNd Takeovers) RegulatioNs, 1997 aNd SEBI (ProhibitioN of INsider TradiNg) RegulatioNs, 1992.
(3.) 0 In view of the above, SEBI formed a prima facie opinion that Shri Samir C. Arora's continued association in the securities market in any capacity would be prejudicial to the interests of the investors and the safety and integrity of the securities market. In view of the grave emergency to save the investors and the securities market from further acts of Shri Samir C Arora, therefore, a preemptive interim Order dated August 9, 2003 was passed by the undersigned, directing Shri Samir C Arora not to buy, sell or deal in securities, in any manner, directly or indirectly, till further orders. 4.1 In consonance with the principles of natural justice and the provisions of Section 11(4)(b) of SEBI Act, 1992, Shri Samir Arora was, however, given an opportunity to file objections, if any, to the said Order within a period of 15 days from the date of the Order and also an opportunity of personal hearing, if he so desired, at 11:30 a.m. on August 28, 2003.;


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