It was discovered throughout the examination that Goenka had not implemented sufficient internal controls inside the business to recognise unpublished price-sensitive information.
According to an April 13 statement by market regulator SEBI, Punit Geonka, the MD and CEO of Zed Entertainment and Enterprises Limited (ZEEL), has paid Rs 50.70 lakh as a settlement payment in a case alleging insider trading actions in the ZEEL scrip.
The Securities and Exchange Board of India (SEBI) issued an interim order on August 12, 2021 against 15 businesses for alleged violations of the SEBI Act and the SEBI (Prohibition of Insider Trading) Regulations, 2015. Confirmatory orders in the suit were issued on September 27, 2021 and February 18, 2022.
During its inquiry, the regulator discovered that some material that constituted Unpublished Price Sensitive material (UPSI) had not been assessed to be such by ZEEL.
ZEEL announced the introduction of Cinema 2 Home Service, specifically ZEEPLEX, a pay-per-view service, on September 1, 2020.
At the time of its inception, ZEEPLEX was a new content consumption medium for consumers as well as a new film distribution business. ZEEPLEX provided its customers with the freedom and convenience of watching their favourite movies from the comfort of their own homes.
The examination by SEBI came to the conclusion that the announcement of the introduction of ZEEPLEX amid Covid limitations was good news for the firm and constituted a “expansion of business.” The information is directly covered by the definition of UPSI under the PIT Regulations, 2015, and is thus in line with that definition.
It was discovered throughout the examination that Goenka had not implemented sufficient internal controls inside the business to locate the UPSI. He failed to recognise this information as UPSI, according to the investigation’s findings. Goenka was then served with a show cause notice in December, asking him to explain why no action should be taken against him for failing to maintain a “adequate and effective system of internal control”.
In response to the show cause notice, Goenka submitted a settlement proposal in January in which he “proposed to SEBI to settle the instant proceedings, without admitting or denying the findings of fact and conclusions of law.”
In a case involving insider trading operations in the stock of Zed Entertainment Enterprises Ltd (ZEEL), the market regulator earlier this month banned three people from the securities market for two years and fined them a total of Rs 90 lakh. Additionally, the three people the regulator barred—Bijal Shah, Gopal Ritolia, and Jatin Chawla—were told to pay the fee within 45 days. When the details of the introduction of ZEEPLEX were accidentally revealed, Shah was the head of financial planning and analysis, strategy, and investor relations at ZEEL. Using this knowledge to trade, Ritolia and Chawla saw earnings of Rs 7.52 crore and Rs 2.09 crore, respectively.
“So far, it has been seen that SEBI has been taking legal action over UPSI leaks, trading based on UPSI knowledge, code of conduct violations, etc. The failure of internal controls to exist or their inadequacy in identifying UPSI was alleged in this order for the first time, according to Makarand Joshi, founder of MMJC and Associates.