The Securities and Exchange Board of India (SEBI) is examining the timing of trades by these six officials to ascertain whether the sales violated regulations and the internal code of conduct of India’s fifth-largest lender, they said.
Investigations are in preliminary stages and show cause notices to the individuals and to the bank, a formal request from the regulator for a response, have not yet been sent, the sources said.
The sources declined to be identified as the investigations are confidential. IndusInd and SEBI did not immediately respond to e-mail queries.
Reuters reported earlier this month that a forensic review by audit and advisory firm Grant Thornton found two bank executives traded in its shares while they were aware of accounting lapses at the bank but before those were made public.
SEBI has sought a copy of the report from the bank, the sources said. The bank had disclosed in March that years of incorrect accounting of internal derivative trades had led to a $230 million hole in its $60.8 billion balance sheet. Its chief executive Sumant Kathpalia and deputy Arun Khurana stepped down last month.
Encashing employee stock options when aware of unpublished price sensitive information can be a violation of the regulator’s rules, one of the sources said.
Insider trading in India can lead to criminal and civil proceedings, however there hasn’t been a criminal conviction for insider trading so far. A SEBI order typically involves a monetary penalty and directives such as a market ban for a specific period of time.
Under the bank’s code of conduct, such a violation can also allow for a claw-back of bonuses and employee stock options, sources added.
The bank has also been asked to explain the delay in disclosing accounting lapses, when the management was made aware of them in September 2024 or even earlier, the sources added.
