The Securities and Exchange Board of India (SEBI) has imposed a penalty of ₹30 lakh on Reliance Industries (RIL) and its two compliance officers for allegedly violating fair disclosure norms over the Facebook-Jio deal.
The fine has been imposed jointly on RIL and its compliance officers — Savithri Parekh and K. Sethuraman.
During the investigation, it was gathered that there was a lot of news flow around Facebook investing in Jio in the month of March and April 2020 prior to the corporate announcement made on April 22, 2020, SEBI says.
The first news about the impending Facebook-Jio deal was published in the Financial Times on March 24, 2020, the market watchdog says, adding that this was widely circulated in the Indian media.
Post publication of the said news articles, the scrip price of RIL went up by almost 15% on March 25, 2020, the regulator says in its order. On the other hand, post corporate announcement on April 22, 2020, price rise in the scrip was around 10% against the previous day closing price, which was comparatively low.
Facebook invested $5.7 billion, or ₹43,574 crore, for a 9.99% stake in Jio Platforms, the digital unit of Mukesh Ambani's Reliance Industries. The deal made the social media giant the largest minority shareholder of Jio Platforms.
Reliance Industries and its two compliance officers did not comply with the principles of fair disclosure which state that there should be prompt dissemination of unpublished price sensitive information (UPSI) that gets disclosed selectively, inadvertently or otherwise to make such information generally available and did not issue any clarification on the same, the SEBI order says.
"RIL should have promptly disseminated or clarified on the stock exchange platform, the UPSI relating to Jio-Facebook deal which got disclosed through publication in the newspapers," SEBI says. The listed entity may on its own initiative also, confirm or deny any reported event or information to stock exchanges, it adds.
SEBI's adjudication officer Barnali Mukherjee in her order held that fair disclosures of unpublished price sensitive information are based on two fundamental premises. One, that information which is UPSI should be enveloped until made public. Second, that if information needs to be made public then it should be made public for all and not selectively.
"One of the circumstances contemplated in law is that if the UPSI is somehow selectively available to someone or is being made available in bits and pieces like rumours or press articles carried in newspapers, the law provides a mechanism where company can clarify on the rumour or such articles in newspapers. This forms a major part of the task that the company would need to address from a rumour verification perspective," says Mukherjee.
"I am unable to be convinced that the company can abdicate its responsibility to verify a news article that has appeared in the newspaper. One of the issues is that information that the company wanted to keep enveloped in secrecy until made public, clearly failed in that objective. Further, when the bits of UPSI that then became selectively available the company abdicated its responsibility to verify and come clean on the unverified information that was floating around," Mukherjee adds.
The company and its compliance officers have been asked to pay the fine within 45 days of the receipt of the order.