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Business Standard
29-05-2025
- Business
- Business Standard
How Sebi fixed ₹20 cr disgorgement in IndusInd Bank insider trading case
The market regulator on Wednesday asked five senior IndusInd Bank officials, including former deputy CEO Arun Khurana and former CEO Sumant Kathpalia, to disgorge around ₹20 crore for alleged insider trading. Khurana has to disgorge ₹14.4 crore, Kathpalia ₹5.21 crore, and others amounts ranging from ₹4 lakh to ₹7 lakh. Here's how the Securities and Exchange Board of India (Sebi) arrived at these figures: IndusInd Bank on March 10 disclosed losses in its derivative portfolio, estimating an adverse impact of 2.35 per cent of its net worth of around ₹1,530 crore (as of December 2024). The bank's stock fell 27.2 per cent the next day: from ₹901 to ₹656. Sebi investigation Following the disclosure and stock crash, Sebi initiated a suo motu investigation to identify trades made with unpublished price-sensitive information (UPSI) related to the derivative losses. The regulator examined records from NSE, BSE, depositories, KPMG, and IndusInd Bank, focusing on the period from September 12, 2023 to March 10, 2025. Why September 2023? Sebi's probe revealed that following the Reserve Bank of India's Master Direction (Classification, Valuation and Operation of Investment Portfolio of Commercial Banks) on September 12, 2023, IndusInd formed an inter-departmental team by September 26 to address derivative accounting issues. At the team's first meeting on September 26, discrepancies in the accounting of derivative contracts were identified, prompting the bank to calculate unreported losses. Who traded before the crash? Also Read Sebi identified individuals who were aware of the derivative loss discussions and traded IndusInd shares during the UPSI period. On December 4, 2023, Khurana sold 348,500 shares to net ₹53 crore. Kathpalia sold 125,000 shares, earning ₹19.2 crore. The three other individuals sold smaller quantities around the same time. Sebi noted that none of these individuals had submitted a trading plan for FY24 or FY25, which would have indicated pre-planned sales unrelated to UPSI. Sebi, in a 32-page interim order, concluded that these individuals traded while aware of the UPSI, thereby avoiding significant losses. 'It would be naive to assume the noticees traded routinely while discussions on discrepancies with a substantial financial impact were ongoing,' said the order. Calculating disgorgement amount Sebi calculated the disgorgement based on losses avoided due to the 27.2 per cent stock price drop post-disclosure. Had the individuals sold their shares after the UPSI became public, their proceeds would have been 27.165 per cent lower, the regulator has held. Thus, Sebi multiplied the number of shares sold by each individual by this percentage to determine the loss avoided, which formed the disgorgement amount. Kathpalia's 125,000 shares sold for ₹19.2 crore and 27.165 per cent of it comes to ₹5.21 crore.
The Print
29-05-2025
- Business
- The Print
Sebi bans IndusInd Bank former CEO, 4 others from securities mkt for insider trading
The other officials of IndusInd Bank Ltd (IBL) restrained by Sebi are Arun Khurana, who was Executive Director and Deputy CEO at the time of the alleged violation; Sushant Sourav, Head, Treasury Operations; Rohan Jathanna, Head, GMG Operations; and Anil Marco Rao, Chief Administrative Officer (CAO), Consumer Banking Operations. In addition to the market ban, Sebi has impounded Rs 19.78 crore collectively from the five individuals, according to an interim order passed by the regulator. New Delhi, May 28 (PTI) Markets regulator Sebi on Wednesday barred former CEO of IndusInd Bank, Sumant Kathpalia, and four other senior officials from accessing the securities markets in connection with an alleged insider trading in the bank's shares. These senior executives allegedly traded in IndusInd Bank shares while in possession of unpublished price-sensitive information (UPSI) related to discrepancies in account balances of the bank's derivative portfolio. By doing so, they violated insider trading regulations. 'During the preliminary examination conducted by Sebi, on the basis of the evidence collected so far, it is prima facie seen that all noticees traded in the scrip being aware of the UPSI related to the discrepancies and averted/avoided huge losses,' the regulator said in its 32-page order. The case originated from a Master Direction issued by the Reserve Bank of India (RBI), which had a significant operational and financial impact on IndusInd Bank. Sebi noted that the internal team of the bank was aware of the financial implications due to discrepancies in the derivative portfolio and had already begun calculating the impact internally. A preliminary examination revealed that an email dated November 30, 2023, was sent by the Head, Accounts, of the bank to certain employees. This communication cited a figure of Rs 1,749.98 crore as the estimated impact of discrepancies in the derivative portfolio. Further, during the preliminary examination, it is prima facie seen that members of the senior management of IBL including noticees (five officials) were aware of the UPSI related to discrepancies and they had kept constant supervision upon the same. The evidence analysed during the preliminary examination revealed that Noticees traded in the scrip of IBL while being insider, Sebi said. Sebi noted that emails dated December 6, 7, and 8, 2023, referenced a discrepancy of around Rs 1,362 crore, with the final figure of Rs 1,572 crore communicated to certain employees on December 11, 2023. The examination also revealed that figures regarding the discrepancies were not only being tracked internally but were also being prepared for submission to the RBI. Emails circulated on December 16, 2023, March 6, 2024, and May 5, 2024, indicated discrepancy figures of Rs 1,572 crore, Rs 1,776.49 crore, and Rs 2,361.69 crore for the quarters ended September 2023, December 2023, and March 2024, respectively. However, this information was only disclosed to the public via stock exchange filings on March 10, 2025, Sebi noted. It was also noted that senior management insisted on getting these figures validated externally. Accordingly, KPMG was appointed in January 2024, to review the discrepancies identified by the internal team. The preliminary examination revealed that KPMG submitted a figure of Rs 2,093 crore as the negative impact from the discrepancies, covering data till December 31, 2023. In its order, Sebi noted that noticee nos. 1 to 5 (five officials) traded in the scrip of IBL while being insider and accordingly barred them 'from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, until further orders.' On April 29, CEO Kathpalia and Deputy CEO Khurana resigned from the bank. Following their exit, the IndusInd Bank Board appointed a Committee of Executives to oversee daily operations until a new MD & CEO takes charge or for a period of three months, whichever is earlier. The fraud-hit private sector lender earlier this month reported a Rs 2,329 crore loss for the March quarter, its worst performance ever, as the interim management opted to go for a deep-clean exercise beyond recognising the impact of wrong accounting practices. In the March quarter, the bank took impact of all the irregularities brought to the notice, including a Rs 1,960 crore hit from incorrect recognition of derivative trades, cumulative interest income reversal of Rs 674 crore due to incorrect accounting, disclosed a Rs 172 crore fraud where employees had led it to incorrectly classify the amount as fee income under the microfinance business, set off Rs 595 crore of incorrect manual entries posted as 'Other Assets' and 'Other Liabilities' in the past, and also recognized the higher slippages. The internal audit report of the bank revealed 'involvement of senior Bank officials, including former Key Management Personnel (KMP), in overriding key internal controls'. The bank reported the likely involvement of senior management in the accounting fraud to the Central Government. PTI SP DP MR MR This report is auto-generated from PTI news service. ThePrint holds no responsibility for its content.
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Business Standard
29-05-2025
- Business
- Business Standard
How Sebi fixed ₹20-cr disgorgement in IndusInd Bank insider trading case
The market regulator on Wednesday asked five senior IndusInd Bank officials, including former deputy CEO Arun Khurana and former CEO Sumant Kathpalia, to disgorge around ₹20 crore for alleged insider trading. Khurana has to disgorge ₹14.4 crore, Kathpalia ₹5.21 crore, and others amounts ranging from ₹4 lakh to ₹7 lakh. Here's how the Securities and Exchange Board of India (Sebi) arrived at these figures: IndusInd Bank on March 10 disclosed losses in its derivative portfolio, estimating an adverse impact of 2.35 per cent of its net worth of around ₹1,530 crore (as of December 2024). The bank's stock fell 27.2 per cent the next day: from ₹901 to ₹656. Sebi investigation Why September 2023? Sebi's probe revealed that following the Reserve Bank of India's Master Direction (Classification, Valuation and Operation of Investment Portfolio of Commercial Banks) on September 12, 2023, IndusInd formed an inter-departmental team by September 26 to address derivative accounting issues. At the team's first meeting on September 26, discrepancies in the accounting of derivative contracts were identified, prompting the bank to calculate unreported losses. Who traded before the crash? Sebi identified individuals who were aware of the derivative loss discussions and traded IndusInd shares during the UPSI period. On December 4, 2023, Khurana sold 348,500 shares to net ₹53 crore. Kathpalia sold 125,000 shares, earning ₹19.2 crore. The three other individuals sold smaller quantities around the same time. Sebi noted that none of these individuals had submitted a trading plan for FY24 or FY25, which would have indicated pre-planned sales unrelated to UPSI. Sebi, in a 32-page interim order, concluded that these individuals traded while aware of the UPSI, thereby avoiding significant losses. 'It would be naive to assume the noticees traded routinely while discussions on discrepancies with a substantial financial impact were ongoing,' said the order. Calculating disgorgement amount Sebi calculated the disgorgement based on losses avoided due to the 27.2 per cent stock price drop post-disclosure. Had the individuals sold their shares after the UPSI became public, their proceeds would have been 27.165 per cent lower, the regulator has held. Thus, Sebi multiplied the number of shares sold by each individual by this percentage to determine the loss avoided, which formed the disgorgement amount. Kathpalia's 125,000 shares sold for ₹19.2 crore and 27.165 per cent of it comes to ₹5.21 crore. The smaller amounts for the other three individuals were similarly calculated.
Mint
29-05-2025
- Business
- Mint
IndusInd Bank share price in focus after Sebi bars former CEO, four others from securities market for insider trading
IndusInd Bank share price will be in focus on Thursday after capital markets regulator Sebi barred the company's former CEO Sumant Kathpalia, and four other senior officials from accessing the securities markets in connection with an alleged insider trading in the bank's shares. The Securities & Exchange Board of India (SEBI) has also impounded ₹ 19.78 crore collectively from the five individuals. The other officials of IndusInd Bank restrained by the regulator for alleged insider trading are former executive director and deputy CEO Arun Khurana, treasury operations head Sushant Sourav, global markets group (GMG) operations head Rohan Jathanna, and Anil Marco Rao, chief administrative officer of consumer banking operations. 'There is no impact on the financial, operation or other activities of IndusInd Bank arising out of the Interim Order,' IndusInd Bank said in a regulatory filing on Wednesday. According to the interim order passed by Sebi, it was found that these senior executives allegedly traded in IndusInd Bank shares while in possession of unpublished price-sensitive information (UPSI) related to discrepancies in account balances of the bank's derivative portfolio. By doing so, they violated insider trading regulations. The case originated from a Master Direction issued by the Reserve Bank of India (RBI), which had a significant operational and financial impact on IndusInd Bank. Sebi noted that the internal team of the bank was aware of the financial implications due to discrepancies in the derivative portfolio and had already begun calculating the impact internally. The bank informed its executives that the estimated financial impact stood at ₹ 1,749.98 crore. In its order, Sebi noted that noticee nos. 1 to 5 (five officials) traded in the scrip of IBL while being insider and accordingly barred them 'from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, until further orders.' On April 29, CEO Kathpalia and Deputy CEO Khurana resigned from the bank. Following their exit, the IndusInd Bank Board appointed a Committee of Executives to oversee daily operations until a new MD & CEO takes charge or for a period of three months, whichever is earlier. The fraud-hit private sector lender earlier this month reported a ₹ 2,329 crore loss for the March quarter, its worst performance ever, as the interim management opted to go for a deep-clean exercise beyond recognising the impact of wrong accounting practices. In the March quarter, the bank took impact of all the irregularities brought to the notice, including a ₹ 1,960 crore hit from incorrect recognition of derivative trades, cumulative interest income reversal of ₹ 674 crore due to incorrect accounting, disclosed a ₹ 172 crore fraud where employees had led it to incorrectly classify the amount as fee income under the microfinance business, set off ₹ 595 crore of incorrect manual entries posted as "Other Assets" and "Other Liabilities" in the past, and also recognized the higher slippages. The internal audit report of the bank revealed 'involvement of senior Bank officials, including former Key Management Personnel (KMP), in overriding key internal controls'. The bank reported the likely involvement of senior management in the accounting fraud to the Central Government. IndusInd Bank share price has fallen 19% in three months and 17% YTD. Over the past one year, IndusInd Bank shares have declined 45%, while the stock is down 13% in three years. On Wednesday, IndusInd Bank share price ended 1.99% lower at ₹ 804.75 apiece on the BSE. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
News18
28-05-2025
- Business
- News18
SEBI Cracks Down On Ex-IndusInd CEO Sumant Kathpalia, Four Others Over Insider Trading: Report
Last Updated: SEBI has banned former IndusInd Bank CEO Sumant Kathpalia and four other officials from the securities market over insider trading allegations. The Securities and Exchange Board of India (SEBI) on Wednesday barred former IndusInd Bank CEO Sumant Kathpalia, former deputy CEO and three other senior officials from participating in the securities markets over allegations of insider trading. The interim order comes in the wake of a major accounting scandal that rocked the private sector lender earlier this year. In March, IndusInd Bank had disclosed that it suffered a hit of approximately ₹1,900 crore due to years of misreporting internal derivative trades. The bank said the issue had been traced back to incorrect internal accounting practices within its treasury department. In a separate issue, the bank also reported that an internal audit of its microfinance portfolio revealed around ₹660 crore was wrongly recorded as interest income over three consecutive quarters. This misreporting further raised questions about the bank's internal controls and financial reporting practices. The regulator has impounded Rs 19.78 crore collectively from the five individuals, according to an interim order passed by Sebi. The other officials restrained by Sebi are Arun Khurana, Executive Director and Deputy CEO of the bank at the time of the alleged violation; Sushant Sourav, Head- Treasury Operations; Rohan Jathanna, Head- GMG Operations and Anil Marco Rao, Chief Administrative Officer (CAO)- Consumer Banking Operations. These senior executives are accused of trading in IndusInd Bank shares while in possession of unpublished price-sensitive information (UPSI), a breach of insider trading regulations. The case stems from a Master Direction issued by the Reserve Bank of India (RBI), which had a significant impact on IndusInd Bank's operations. The bank's internal team had evaluated the financial implications of the directive and possessed non-public information at the time. Sebi's investigation found that the five individuals executed trades before this sensitive information was made public, using their access to confidential insights for potential personal gain. Accordingly, SEBI said: 'All the Noticees, viz. Noticee Nos. 1 to 5, are hereby restrained from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever, until further orders." (with PTI inputs) First Published: May 28, 2025, 19:58 IST
