Sebi imposes Rs 5 lakh fine on erstwhile Satyam Computer's officer G Jayaraman

MUMBAI: Sebi has imposed a Rs five lakh fine on the erstwhile Satyam Computer's compliance officer G Jayaraman for failing in his duty to avoid insider trading in the company's shares in December 2008 - days before a major corporate scam broke out at the IT firm.

Jayaraman's role came to the light during market regulator Sebi's investigations into the Satyam scam, which came to light during the financial year 2008-09, Sebi said in an order dated July 27, which was made public today.

The investigation revealed that Satyam's then Chairman Ramalinga Raju had proposed on December 06, 2008 the acquisition of Maytas Infra and Maytas Properties (two companies promoted by Raju's family) by the IT firm.

The announcement for these acquisitions were made public on December 16, 2008, and the plans were subsequently dropped next day on December 17, 2008, followed by a confession by Raju on January 7, 2009 about large-scale irregularities at the company.

Sebi said its probe found that the trading window for Satyam shares was closed for insider trading from December 17, 2008 till beyond January 9, 2009, although Jayaraman, as compliance officer of the company, was required to close the trading window much earlier on December 6.

Satyam's announcement on December 16, 2008 (evening) to acquire Maytas Infra and Maytas Properties resulted in a substantial fall in Satyam share price on December 17, 2008 when the scrip fell by over 33 per cent, and recovered marginally after cancellation of the decision.

Sebi investigation alleged that Jayaraman "violated the provisions of the 'Model Code of Conduct for Prevention of Insider Trading for Listed Companies' ... by not closing the trading window when unpublished price sensitive information about the acquisition...came into existence."

After a thorough probe, Sebi had imposed a penalty of Rs 5 lakh on Jayaraman on November 29, 2011, but this order was challenged at Securities Appellate Tribunal (SAT), which remanded the matter for a fresh probe by the regulator.

Sebi again issued fresh show-cause notices and gave Jayraman to present his case again in the matter.

Jayaraman contended that "time for commencement of closing the trading window and company's decisions are taken by the Board of Directors" and there was no such direction from the board to him to close the trading window on December 6, 2008.