Biocon's Kiran Shaw asked to pay Rs 9.5 lakhs for portfolio manager's fault

Last Updated: Fri, Mar 01, 2019 13:13 hrs
Kiran Shaw with Sudha Murthy

Bengaluru: Losing money owing to a portfolio or fund manager's fault is nothing new in the world of stock markets. This time around though, such an unfortunate incident befell upon Kiran Mazumdar Shaw, the Chairman of India's pharmaceutical major Biocon Ltd.

The portfolio manager's fault means Shaw will have to pay a fine of Rs 9.5 lakhs. Sadly, for no fault of hers.

That amount is a penalty for executing a transaction involving trade of shares of Infosys, the technology and consulting major.

Infosys, in its filing report released on Thursday explained that 1600 shares of the company were sold in open trade without prior notice.

Shaw, an independent director with Infosys, is bound to submit information about such a trade well in advance. An audit committee from Infosys after due diligence noted that there was a violation on part of the trade.

However, the committee added that there was no intent to violate either SEBI's insider trading rules or Infosys Insider trading practice.

As such, Shaw will have to pay the fine of Rs 9.5 lakhs. And, that amount would go to a charity of Shaw's choice.

What the Infosys Filing says:

"On February 13, 2019, it was brought to the attention of the Compliance Officer of Infosys Limited that Kiran Mazumdar-Shaw, Lead Independent Director of the Company, had inadvertently, through her portfolio management services, sold 1,600 shares of Infosys Limited without obtaining preclearance of trade (“Trade”). The Trade occurred when the trading window was open."

"The Trade was carried out by the portfolio manager without the knowledge of Ms. Mazumdar-Shaw. In portfolio management services, the investor does not generally monitor the day-to-day investment decisions. In this case as well, Ms. Mazumdar-Shaw had given no instruction to conduct the Trade and she also had no knowledge of the Trade having occurred. The portfolio manager unilaterally took the decision to conduct the Trade," said the filing report.

"The Audit Committee of the Company's Board of Directors, which is responsible for review of compliance with the Insider Trading Policy of the Company was notified of this matter. Based on Ms. Mazumdar-Shaw’s submission, the Audit Committee believes, that this was an inadvertent Trade made without intent to violate the Infosys Insider Trading Policy or the SEBI (Prohibition of Insider Trading) Regulations, 2015 ("PIT Regulations")."

"However, the Audit Committee has determined that there was a violation of the Infosys Insider Trading Policy and the PIT Regulations and therefore imposed on Ms. Mazumdar-Shaw, a penalty of Rs. 9,50,000 which amount shall be payable to a charitable organization of her choice. In accordance with the PIT Regulations and the Infosys Insider Trading Policy, Infosys will also be notifying the SEBI of this event."

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