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Sebi indicts Samir Arora

Mumbai, Aug. 9: Four days after he announced his decision to quit Alliance Capital to team up with Rana Talwar’s Sabre Capital worldwide, Samir Arora is in the dock.

The Securities and Exchange Board of India (Sebi) has found him guilty of insider trading, non-disclosures and in some cases even wrong disclosures. Sebi investigations have unraveled the wrongful deeds committed by the ace fund manager that included profiteering from inside information not available to the public.

In a late evening order signed by Sebi member T. M. Nagarajan, the market regulator barred Samir Arora not to buy, sell or deal in securities, in any manner, directly or indirectly, till further orders. This order, Sebi said, would into effect immediately.

Arora has been given time to file his objections, if any, to the order within 15 days.

That the news will create ripples in the market is obvious as Arora is considered as a point man for the bulls.

“I find that, prima facie, the conduct of Arora is not in consonance with the high standards of integrity, fairness and professionalism expected from a fund manager. His conduct erodes investors’ confidence and is detrimental to their interests as well as the safety and integrity of the securities market,” Nagarajan said in his order.

Sebi found that in October 2002 the foreign principals of Alliance Capital Mutual Fund (ACMF) had invited bids for selling its stake in the Indian operations.

Coinciding with this expression of interest to sell the Indian asset management arm, Alliance Capital Mutual Fund reported a fall in assets under management by around Rs 1000 crore.

Alliance Capital later decided that it plans to retain its ownership interest and would continue to manage and support the mutual fund arm as an on-going asset manager in the Indian market place and Arora will continue to lead the organisation.

Sebi learnt out of 11 initial bidders, five were selected for second round negotiations between January 13 and January 29 this year.

One of the bidders approached ACM for preempting the bidding process and proposed to proceed immediately to a final agreement. During this period, ACMF experienced large scale redemptions, which resulted in the fall of net asset value of certain schemes.

Sebi found that Arora was taking all investment decisions of the equity and balanced schemes of ACMF and was also managing the Indian allocation of Asian Funds of ACM.

Arora and two equity analysts of his team had informed the management of ACM (when it was in negotiations with the bidders, for the sale of its stake in ACAML) that they did not intend to work for any bidder other than the Henderson Global Investors.

Henderson had promised him 6 per cent share of the new company immediately and another 13 per cent over a period of five years and Henderson was interested in bidding for the company only if Arora joined them.

He has further stated that the bid made by Henderson was for a sum of $ 36 million.

Therefore, if Henderson was successful in acquiring the stake, Arora would have made a personal gain of approximately Rs 10 crore and another Rs 20 crore or more in another five years. It was therefore in his personal interest that none of the other bidders buy the mutual fund, Sebi concluded.

“In order to achieve his selfish objective Arora made it known to the public that he would be exiting from the mutual fund,” Sebi said.

During the uncertainty, the fund experienced large-scale redemption pressure, forcing the fund to liquidate substantial assets under its portfolio.

Sebi found that the major chunk of redemptions were by corporate houses and high net worth unit-holders, leaving small investors in the lurch.

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