For Abhay Bhutada, 2021 was set to be the biggest year of his career. The MD and CEO of vaccine scion Adar Poonawalla's fledgling non-banking finance company, Poonawalla Finance, he'd overseen the company's tepid start to life. That was all set to change with the February 2021 acquisition of Magma Fincorp and its $1.9 billion loan book for nearly $470 million. The acquisition saw Magma rebranded to Poonawalla Fincorp, with Bhutada appointed as MD of the company. Just six months later, however, Bhutada would resign from his position after market regulator Sebi accused him of insider trading. Sebi alleged that he'd passed on confidential insider information about the Magma acquisition, thereby allowing associates to illicitly profit from the deal. Bhutada, though, maintained his innocence. Sebi now seems to accept Bhutada's contention that the others accused in the case independently knew about the acquisition. He has since been reinstated at Poonawala Fincorp as well, with the company's internal investigation giving him a clean chit. The case is an outlier—a rare instance where someone accused of insider trading actually keeps their job (even if their reputation may be irrevocably tarnished). And while the case is still under investigation, it points to how flimsy Sebi's insider trading cases can be. While the regulator has data-based alert systems, whistleblowers, and media reports to help it identify cases of insider trading, actually proving that stock price-sensitive information was communicated between accused parties is much harder. Especially because Sebi, unlike its American counterpart, has no powers to access wiretaps of the phones of those suspected of insider trading. This, coupled with the lack of legal firepower in Sebi's investigations team, makes it difficult to move beyond circumstantial information. Just last week, India's apex court even overturned one of Sebi's rulings in an insider trading case for exactly this reason. How Sebi's suspicious minds identify and investigate insider trading cases, highlighting the holes that ensure insider trading in India remains both hard to diagnose and harder to fix...
