SEBI Imposes Rs. 40 Lakh Fine on Brightcom Group & its Promoters

SEBI Imposes Rs. 40 Lakh Fine on Brightcom Group & its Promoters

The Securities and Exchange Board of India (SEBI) levied fines totalling Rs. 40 lakhs on Brightcom Group and its promoters for flouting regulatory norms. Brightcom Group Ltd (BGL) is listed on both BSE and NSE.

SEBI had conducted an examination in the matter of BGL to ascertain the violation of provisions of insider trading norms, if any, by certain entities while trading in the shares of the company from April 2020 to August 2021.

In its examination, the regulator found that Vijay Kumar Kancharla HUF, M Suresh Kumar Reddy, S. V. Rajyalaxmi Reddy and Geetha Kancharla traded in the scrip of BGL during April 2020 to August 2021.

They had to file necessary disclosures as they had breached the regulatory threshold of Rs 10 lakh on various occasions as per the Prohibition of Insider Trading (PIT) norms.

In this regard, the Adjudicating Officer Amit Kapoor noted that the requirement under PIT regulations is based on the value of the transaction, whereas the requirement under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) is based on the shares held at the end of a quarter, which does not indicate the transaction done which exceeds certain value and the number of times it is carried out during a quarter, in any manner.

The Board observed, “The requirements given in the LODR Regulations and the PIT regulations are independent of each other and are to be complied with independent of each other as they have different purpose. Further, I note that the disclosures under Regulation 7 (2) (a) of the PIT Regulations, are required to be given to the company within two trading days of such transaction and as per Regulation 7 (2) (b) of the PIT Regulations the company is required to notify the particulars of such transaction(s) to the stock exchange(s) on which the securities are listed within two trading days of receipt of the disclosure.”

SEBI further found that the disclosures submitted under LODR regulations did not serve the requirements given under PIT Regulations in so far as the timelines were concerned.

Therefore, it held that the promoters had failed to file the necessary disclosures under the norms and flouted the PIT regulations.

SEBI noted that the M Suresh Kumar Reddy, S V Rajyalaxmi Reddy and Geetha Kancharla had carried out “Contra trades” during the examination period.

The Adjudicating Officer observed that clause 10 of Schedule B of PIT Regulations does not specify that only “online” trades are covered in the prohibition so far as contra trades are concerned. Hence, it is given fact that in absence of any specific provision, all contra trades be it “online” or “off line” trades, are covered in the said prohibition irrespective of purpose of transaction, opined the Board.

SEBI was of considerate view that if only “online” contra trades are covered in the prohibited trades then more and more clients may opt for “off line” trades or combination of “online” or “off line” trades thereby, defeating the very purpose of having prohibition on contra trades.

Based on the above, it was established that M Suresh Kumar Reddy, S V Rajyalaxmi Reddy and Geetha Kancharla violated Clause 10 of Schedule B read with Regulation 9(1) of PIT Regulations, thereby attracting penalty under section 15HB of SEBI Act

In the light of findings and observations, SEBI deemed it to be established that the Noticees had violated the provisions of PIT Regulations/Circulars and were liable for monetary penalty under the provisions of section 15 A(b) and/or 15HB of the SEBI Act.

Accordingly, the regulator imposed a fine of Rs. 12 lakhs on Geetha Kancharla, Rs. 6 lakh each on Vijay Kumar Kancharla HUF, Vijay Kumar Kancharla, Karta of HUF and M Suresh Kumar Reddy (Chairperson and MD) and Rs. 5 lakh each on S. V. Rajyalaxmi Reddy and Brightcom Group Ltd (BGL).