SEBI probing BankAm, DSQ deal

NetScribes/Janaki Krishnan

The Securities and Exchange Board of India has commenced investigations into suspected violation of insider trading norms, in a deal earlier this year, between DSQ Software and BankAm.

According to senior SEBI officials, in March this year, a leading financial daily had carried news about the BankAm-DSQ deal, along with details of the pricing and other terms. At that point in time, when SEBI had asked BankAm for an explanation, the latter had denied the report.

The deal attracted much attention, resulting in the DSQ scrip rising at the local markets and the counter witnessing hectic trading. SEBI has now asked BankAm to furnish details of the deal, officials at the regulatory authority said.

SEBI officials said they were trying to ascertain whether there had been any attempt to deliberately push up the price of the DSQ scrip through this selective information 'leak'. If SEBI's suspicion proves correct, it would then establish a case of 'unfair market practices' against the companies involved.

Until recently, the securities watchdog dealt with cases of suspected insider trading on a case-to-case basis. However, it recently drew up a comprehensive set of norms, the draft report of which has been put up for debate to invite more suggestions.

According to the draft, the onus of ensuring adequate checks in the organisation to prevent insider trading is on the company itself. Chinese walls would have to be put up between the various departments of a company or institution so that information privy to one division is not utilised by another to trade in the scrips of the company concerned. This would be especially true of mutual funds and financial institutions, which carry on investment, advisory as well as broking activities and are privy to 'sensitive market information' about a company.

After a private placement late last year, BankAm and Credit Suisse First Boston jointly hold 33 per cent stake in DSQ, each holding 16.5 per cent of the shares. The private placement was made at a price of Rs 275 per share (Rs 265 being the premium for a Rs 10 share). DSQ and BankAm later announced a $20-million joint venture to develop software solutions for international banking. The joint venture has now been put on hold.

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