Sebi has barred Yatendra Kumar, a former executive of Wockhardt Ltd, from the securities market for six months and directed him to disgorge losses of over Rs 14 lakh averted by flouting insider trading rules.
In addition, he has been restrained from buying, selling or dealing in the securities of Wockhardt Ltd for one year.
The Securities and Exchange Board of India (Sebi) conducted an investigation in the matter of trading in the scrip of Wockhardt for the period from January 2012 to August 2013 to ascertain any violation of the provisions of insider trading rules.
In its 50-page order on Monday, Sebi found that Kumar traded in the company's shares when in possession of unpublished price-sensitive information (UPSI) regarding issuance of Form 483 by the US Food and Drug Administration (USFDA) to Wockhardt's manufacturing facility at Waluj in Maharashtra.
Form 483 contains FDA's observation in detail and is issued if USFDA finds objectionable conditions upon completion of inspection of facilities. The issuance of such a form is regarded as adverse observations. Unless rectified, it may ultimately lead to issuance or warning and import alert, which have financial implications for the concerned company.
Going by the order, the USFDA issued Form 483 to Wockhardt on March 22, 2013, which was price sensitive information, and the drug firm made the information public on April 15 of the same year by issuing a press release on its website. Thus, the period from March 22 – April 15, 2013 is considered a period of UPSI.
Kumar, who was holding the post of President Pharma Research, Global IP, Quality Assurance/Quality Control and Regulatory Affairs at Wockhardt, offloaded 6,841 shares between March 22, 2013 and April 14, 2013; and divested 1,041 shares between April 15, 2013, and July 31, 2013.
In his reply to Sebi, he accepted that he came to know about issuance of the form on March 22 itself.
By indulging in such trades, Kumar has averted loss of Rs 14.23 lakh and thereby violated insider trading rules and accordingly Sebi put several restrictions on him.
Last month, Wockhardt and its three promoter entities -- Habil Khorakiwala, Murtaza Khorakiwala and Huzaifa Khorakiwala -- settled with Sebi a case pertaining to alleged non-disclosure of adverse observations made by the USFDA about the company' Waluj facility to the exchanges in 2013.