The Case of insider trading (HLL-BBLIL Merger)

            
 
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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : FINC014 For delivery in electronic format: Rs. 200;
For delivery through courier (within India): Rs. 200 + Rs. 25 for Shipping & Handling Charges

Themes

Ethics in Business
Case Length : 8 Pages
Period : 1995 - 1998
Pub. Date : 2002
Teaching Note : Available
Organization : HLL, BBLIL, SEBI, UTI
Industry : Diversified
Countries : India

Abstract:

The case study analyses the issues related to the insider trading charges against HLL with regard to its merger with Brooke Bond Lipton India Ltd. The case focuses on the legal controversy surrounding these charges. The controversy involved HLL's purchase of 8 lakh shares of BBLIL two weeks prior to the public announcement of the merger of the two companies (HLL and BBLIL). SEBI, suspecting insider trading, conducted enquiries, and after about 15 months, in August 1997, SEBI issued a show cause notice to the Chairman, all Executive Directors, the Company Secretary and the then Chairman of HLL. Later in March 1998 SEBI passed an order charging HLL with insider trading.

Finance | Case Study in Management, Operations, Strategies, Finance, Case Studies

SEBI directed HLL to pay UTI compensation, and also initiated criminal proceedings against the five common directors of HLL and BBLIL. Later HLL filed an appeal with the appellate authority, which ruled in its favour. Through a description of the legal causes surrounding the SEBI's charges against HLL, this case, is designed to enable students to understand and appreciate the role of the legal framework under organizations function.

It also stimulates the students to understand the legal implications of decisions made by an organization and provides an insight into how a typical legal case proceeds. At the end of the case-discussion, students should have grasped the following issues: A general understanding of the legal framework covering the securities market in India. An understanding of the role and importance of a regulating agency in checking financial crimes such as insider trading. An understanding of the responsibilities of organizations. The case is intended for MBA/PGDBM level students as a part of their Business Ethics curriculum.

Issues:

Merger of HLL & BBLIL, Alleged insider trading by HLL

Contents:

  Page No.
Locking Horns 1
Background Note 1
Face To Face 2
Is HLL An Insider? 3
Is the Information Un-Published? 3
Information About Merger-Price-Sensitive? 4
Did HLL Gain Financially? 4
Prosecution Not Justifiable 5
HLL Not Guilty-Proposal 'Generally Known' 5
Time to Introspect 6

Keywords:

Insider trading, HLL, merger, Brooke Bond Lipton India Ltd., legal controversy, 8 lakh shares, BBLIL, two weeks prior, public announcement, merger, SEBI, insider trading, conducted enquiries, 15 months, August 1997, SEBI, show cause notice, Chairman, Executive Directors, Company Secretary, Chairman, March 1998, UTI, compensation, criminal proceedings, five common directors, appellate authority

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