The Securities and Exchange Board of India (SEBI) in an order dated 1 July 2020 said that eight key management members of Divi' s Laboratories Limited indulged in insider trading of the company's stock in July 2017. The markets regulator has imposed a penalty of about Rs 96.68 lakh on the company's chief financial officer and seven of his close associates for violating insider trading rules.
Shares of Divi' s Laboratories fell as much as 6.7 percent to Rs 2,090.05 on Thursday before recovery.
SEBI had conducted an investigation into suspected insider trading activities in the scrip of Divi's Laboratories for the 7 to 10 July 2017 period to ascertain whether certain entities had traded in the scrip on the basis of unpublished price sensitive information.
Divi's Labshad made an announcement on 10 July 2017 during market hours to the exchanges titled 'USFDA to Lift Import Alert 99-32 on the company's Unit-II at Visakhapatnam.' The regulator's investigation found that on 10 July 2017, the closing price increased by 7.7 percent when compared to the opening price. Also, the volume of trades rose by 32 times of the previous day.
SEBI said that Kiran Devi, a whole-time director at the company at the time had received an email at 4:36 am on 7 July 2017 from its Regulatory Counsel (who interacted with US FDA) that 99-32 import alert is being lifted. Kiran Divi forwarded the email to four others in Divis including YTS Prasad, General Manager in the next two hours.. YTS Prasad forwarded the aforementioned email to eight other people in the company on the same morning.
However, the materiality of the information was discussed in a board meeting on 10 July 2017 and disclosed to the exchanges on the same day.
"Based on investigation conducted by SEBI, L Kishore Babu, Praveen Lingamneni, Nagesh Lingamaneni, Sri Lakshmi Lingamaneni, D. Srinivasa Rao, Radhika Dronavalli, Gopichand Lingamaneni and Pushpa Latha Devi were identified as "insiders" who had, directly or indirectly, traded in the scrip during the Investigation Period," SEBI's order said.
SEBI has impounded the alleged unlawful gains of a sum of Rs 96,68,182.14 (alleged gains of Rs 74,08,024.35 + interest of Rs 22,60,157.79 for the period 10 July 2017 to 24 January 2020 from the eight persons.