Sebi slaps Rs 2 cr fine on 7 entities for violating mkt norms while dealing in Zylog Systems’ scrip

New Delhi, Nov 25: Markets regulator Sebi has imposed a fine totalling Rs 2 crore on seven entities including promoters and former senior officials of Zylog Systems Ltd for violating several market norms while dealing in the firm’s scrip.
Out of the entities facing penalty, Sthithi Insurance Services, Sudarshan Venkataraman and Ramanujam Sesharathnam were promoters of Zylog.
Besides, Vekantaraman is the former chairman and chief executive officer, while Sesharathnam was managing director and chief operating officer of the firm and M V Ganesan was its vice president-corporate accounts.
Sebi found that certain entities who were found to be person acting in concert, had acquired shares in excess of 5 per cent and 10 per cent. Therefore, in terms of Substantial Acquisition of Shares and Takeovers norms, they were required to make a public announcement of an open offer for acquiring shares of Zylog.
However, they failed to do so, the Securities and Exchange Board of India (Sebi) said in an order passed on Tuesday.
Also, Venkataraman and Sesharathnam created a scheme of dealing in Zylog’s shares whereby investors were deceived.
Some of the entities assisted in this scheme by acting on their instructions while some other entities, in whose accounts the trades took place, were participants in the scheme.
Their conduct was in violation of Prohibition of Fraudulent and Unfair Trade Practices norms, Sebi noted.
The officials also made misleading disclosures.
During 2012, Zylog was in a financial crisis and was unable to pay principal as well as interest instalments with regard to various loans availed by it.
It had failed to pay the dividend and was also facing issues with regard to salary-related payments.
“Despite these issues, Zylog Systems Ltd (ZSL) made the disclosure that it was business as usual, which was a false and misleading disclosure.” Sebi said.
In addition, public was misled regarding the actual shares held by the promoters and related party transactions were also not disclosed.
Sthithi Insurance Services, Venkataraman and Sesharathnam also did not disclose their pledge related transactions in the scrip of ZSL to BSE and NSE.
Some of the entities had failed to disclose about their off-market transactions on several instances, the probe found.
Sebi noted that ZSL had come out with its initial public offering in 2007, and the red herring prospectus (RHP) was signed by P Srikanth and S P Srihari.
They violated market norms by certifying incorrect disclosures of relationships between P Srikanth, S P Srihari, and Srikanth Sripriya and of Srikanth’s directorship.
P Srikanth was the whole time director of Zylog and Srikanth Sripriya is his wife. S P Srihari is Sripriya’s brother and was also global chief financial officer of Zylog.
The name of Twinkle Natural Resources Pvt Ltd was not disclosed in the RHP despite Srikanth being its director. For violating several market norms, the entities are facing fine totalling Rs 2 crore. (PTI)