The Securities and Exchange Board of India may issue three to four more orders in the IndusInd Bank matter, in addition to the ongoing insider trading case, according to people familiar with the matter.
One of the pending matters is with SEBI’s Corporation Finance Investigation Department, while another is under review by the Corporation Finance Department, the people said.
Profit was further told that the regulator’s probe has expanded from initial data-related concerns to cover broader compliance issues, including corporate governance issues as well. It is important to note that this is in addition to the insider trading-related investigation in which SEBI released an order last month.
SEBI is also examining alleged lapses in timely disclosures. A confirmatory order is expected next month, while additional orders may follow in 10 days to a few weeks, the people said.
Further market restrictions and potential bans on holding positions may also be announced as part of the continuing regulatory action.
In an interim order dated May 28, SEBI had barred the bank’s former chief executive officer, Sumant Kathpalia, and four others from the securities market from trading while having unpublished sensitive information. However, the entire fiasco dates back to 2023.
On Sept 12, 2023, RBI issued a Master Direction on how banks should classify, value and report their investment portfolios, including derivatives. This directive made it mandatory for banks to follow a revised accounting method for derivatives, as per the Institute of Chartered Accountants of India’s 2021 Guidance Note, with some exceptions.
It also required banks to disclose their derivative assets and liabilities separately in their financial statements and prohibited them from paying dividends out of unrealised gains from complex derivative instruments, known as Level 3 derivatives.
Following this, IndusInd Bank formed an internal team to implement the new guidelines. In its first meeting held the same day, the team identified that the bank had been incorrectly accounting for its derivative contracts.
SEBI believes that the individuals named in the order may have been aware of material financial information not yet disclosed to the public and that such information could have influenced trading decisions.
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