The adjudicating officer of the Securities and Exchange Board of India has disposed of proceedings initiated against Arun Jain, founder of city-based Polaris Software (now part of US-based Virtusa) on alleged violation of Clause 1.2 of the Model Code of Conduct for prevention of insider-trading for listed companies.

SEBI conducted an investigation into the matter for the period April 21, 2008, to July 31, 2008 and observed violation by Jain.

During the investigation, it was observed that the company declared the quarterly results on July 17, 2008, for which the period for unpublished price sensitive information (UPSI) was from July 7-17, 2008, and approval of commencement of real estate business activity on July 17, 2008, for which USPI period was from June 9 to July 17, 2008. It was also alleged that Jain was privy to the UPSI and had traded in the company’s shares during the period. It was also alleged that the company had failed to recognise R Srikanth as a ‘designated employee,’ who was then ‘compliance officer.’

In his reply, Jain said Srikanth was Polaris’ compliance officer and there was no provision requiring the compliance officer to be a ‘designated officer’. He also said for practical purposes, when the compliance officer was responsible to ensure compliance with the code, it would be in the best interest to keep the officer distinct and separate from the list of designated employees.

In his order, adjudicating officer Prasanta Mahapatra said although Polaris had not identified the ‘compliance officer’ as designated employee, the company’s code of conduct requires pre-clearance of trades of the officer by a director and all restrictions and conditions applicable to designated employees are also applicable to the compliance officer.

“In my view, the requirements specified for a designated employees has been adhered to. Therefore, no action is warranted in the instant matter against Jain for alleged violation,” the order said.

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