SEBI imposes Rs 7 crore fine on Kudvas

We never have enough wealth, no matter how much we have. We always desire to have more than what we have. Wealth helps us to get the most that the earth affords. And this desire to have more than required often leads to falling from grace for many individuals.   

This is an international phenomenon and we saw the CEO of one of the biggest consulting firms serving jail for insider trading. The latest case is in India, where one of the top and best professionals had succumbed to this temptation. The only change is that rather than getting more wealth, they tried to protect their wealth.   

We are talking about Vivek Kudva, Former Head of Franklin Templeton Asia Pacific (APAC), and his wife Roopa Kudhva, erstwhile CEO & MD of CRISIL.    

“In the matter of inspection of six debt schemes of Franklin Templeton Mutual Fund, the issue that arises for consideration in the present matter is whether the redemption of units in some schemes of a mutual fund by a director of the asset management company of the mutual fund, and his immediate family, at a time when the said schemes were facing significant redemption pressure (the schemes were later wound up) and the director was allegedly in possession of material non-public information relating to the same, would fall within the scope of fraudulent ’ or ‘unfair trade practice’ as defined under SEBI (Prohibition of Fraudulent & Unfair Trade Practices) Regulations, 2003.”
“The  data  regarding  the  purchases  and  redemptions  of  units  in  the  schemes  by  the  key personnel of FT–AMC during the period April 1, 2019, to April 23, 2020, was examined by the Auditor and it was observed that -Vivek Kudva (Director of FT–AMC), - Roopa Kudva (wife of Vivek Kudva) and Vasanthi Kudva (mother of Vivek Kudva) had redeemed units in the impugned debt schemes during the period.”   

“AMC was privy to information such as concerns of redemption, concentration, and liquidity risk pertaining to the stress in the impugned debt schemes, most of which, was not in the public domain.  

The  allegations  in  the  SCN are  based  on  the  redemptions  being  undertaken  on  the basis of inequality of information, which is a characteristic of trading that is prohibited under the PIT Regulations.”  

 Consequent to this, SEBI has also ordered the couple to transfer Rs 30.70 crore of redeemed Franklin Templeton (FT) units to escrow account within the next 45 days.