Case Overview

This order arises from SEBI's investigation into trading activities of promoters of SecureKloud Technologies Ltd (formerly 8K Miles Software Services Ltd) during April 1, 2017 to September 13, 2019. The case follows observations in SEBI's interim order dated August 4, 2022 and final order dated December 16, 2022 that found financial misreporting and fictitious revenue booking by the company's promoters and management.

The principal allegations involved violations of Section 12A(d) and (e) of the SEBI Act, 1992 read with Regulation 4(1) of SEBI (Prohibition of Insider Trading) Regulations, 2015. The unpublished price sensitive information (UPSI) was identified as the misstated financial statements of SecureKloud during FY 2017-18 to 2018-19, which included inflated revenues and balance sheet size through fictitious transactions with entities controlled by promoters.

Key findings include:

  • The UPSI period was determined as April 1, 2017 to November 2, 2019, when the information became generally available through auditor Deloitte's report disclosure on November 3, 2019
  • Noticee No. 1 (Suresh Venkatachari) sold 39,50,000 shares through off-market transfers while serving as Managing Director/CEO and Chairman
  • Noticee No. 2 (R S Ramani) sold 16,82,506 shares while serving as Whole Time Director and CFO
  • Noticee No. 3 (M V Bhaskar) was exonerated as he had resigned in 2013 and taken steps for reclassification from promoter category
  • The trades were presumed motivated by UPSI possession under Explanation to Regulation 4(1) of PIT Regulations

Final Outcome

The order imposes the following directions:

Against Noticee No. 1 (Suresh Venkatachari):

  • Prohibited from accessing securities market and dealing in securities for 2 years
  • Monetary penalty of ₹25,00,00,000 (Twenty Five Crore Rupees)

Against Noticee No. 2 (R S Ramani):

  • Prohibited from accessing securities market and dealing in securities for 2 years
  • Monetary penalty of ₹15,00,00,000 (Fifteen Crore Rupees)

Against Noticee No. 3 (M V Bhaskar):

  • No directions imposed, allegations disposed of

The debarment period shall commence after expiration of the 3-year restraint period imposed in the December 16, 2022 final order. Penalties must be paid within 45 days of order receipt.

The order declined to direct disgorgement of wrongful gains (calculated as ₹175.03 crore for Noticee No. 1 and ₹103.18 crore for Noticee No. 2 in the SCN) due to methodological concerns about attributing price decline over the extended UPSI period solely to the UPSI.

Topics: Insider Trading, Financial Misrepresentation, SEBI Enforcement