Market regulator, Securities and Exchange Board of India (SEBI) imposed fines on two former executives of the global pharma company Workhardt totalling Rs 13 lakh for violating insider trading regulations. 

SEBI released a 35-page order imposing a fine of Rs 12 lakh on Dr Yatendra Kumar for trading shares of Wockhardt while having unpublished price-sensitive information (UPSI) about the Form 483 issued by the US Food and Drug Administration (USFDA) to the company’s manufacturing facility in Waluj Maharashtra. 

SEBI investigated the trading activity of the Wockhardt scrip from January 2012 to August 2013 to look for any violations of the insider trading rules. The regulator also slapped a fine of Rs 1 lakh on Shashi Kant Tiwari. 

Kumar was the President of Pharma Research, Global IP, Quality Assurance/Quality Control and Regulatory Affairs at Wockhardt. Shashikant was a General Manager in Analytical Development at Wockhardt Research Centre (R&D) Centre Aurangabad. 

The USFDA issued Form 483 on March 22, 2013, as it found objectionable conditions at the facility upon inspection. The observation may lead to a warning letter or import alert if not acted upon or rectified, which may have financial implications for Wockhardt. 

This makes the news about the issuance of the form price-sensitive information. The information was made public on April 15. Thus, the period from March 22 to April 15, 2013, was considered a period of UPSI. 

SEBI’s investigation found that Kumar benefitted from selling the company’s shares while possessing UPSI, avoiding an illegal loss of Rs 14.23 lakh. It was also observed that Kumar did not seek pre-clearance before trading the scrip. 

Kumar sold 500 shares of Wockhardt on March 12, 2013, while Tiwari bought 380 shares of the company on December 13, 2012, and sold 943 shares on April 4, 2013. Kumar did not disclose the buy side of this trade. Therefore, both of them reversed their position in Wockhardt shares within six months and violated the SEBI’s insider trading code of conduct provisions. 

SEBI earlier restrained Dr Kumar from the securities market for six months and from buying, selling or dealing in the securities of Wockhardt Ltd for one year. The regulator directed him to abandon losses of over Rs 14 lakh averted by violating insider trading rules in the same matter.