Amazon has asked the market regulator Securities and Exchange Board of India (Sebi) to investigate Future Retail Ltd for insider trading, and accused the Kishore Biyani retail firm of breaching confidentiality by leaking the interim award of Singapore International Arbitration Centre (SIAC) to Reliance Industries Ltd.
Last month, SIAC ruled that Future Group’s proposed retail sell-out plans to Reliance should be put on hold until it gives the final order. RIL issued a statement after a few hours on the same day that it will enforce its rights in India to complete the transaction with Future Group without any delay. Amazon claimed that the detailed award information was not just material for the purpose of Listing Obligations and Disclosure Requirements (LODR regulations) but also had price sensitivity for a listed entity.
“Details of the interim award was disclosed to Mukesh Dhirubhai Ambani (MDA) Group by Future Retail or its promoters prior to the same being disclosed to the general public, in an egregious breach of the Prohibition of Insider Trading regulations (PIT),” the US retail giant wrote in a letter to market regulator Sebi, adding that the first public disclosure of the interim award was made by MDA Group, which was not a party to the arbitration proceedings.
‘FRL Failed in Its Fiduciary Duties’
“They could have received details only from FRL or its promoters. FRL has failed to perform the fiduciary duties toward its shareholders,” said Amazon in the letter, reviewed by ET.
An email sent to Sebi remained unanswered. Amazon and Reliance did not respond to queries.
Future Group in August announced that it would merge five listed entities, including Future Retail, into Future Enterprises Ltd, which currently houses the group’s retail back-end infrastructure. The retail business would then be transferred to Reliance in a slump sale for nearly Rs 25,000 crore.
Amazon indirectly owns a 5% stake in Future Retail — which houses all food and grocery stores such as Big Bazaar, HyperCity, Easyday and Nilgiri’s — through a 49% stake in promoter holding firm Future Coupons that it bought for Rs 1,500 crore last year. The Seattle based e-tailer has accused Future of violating the contract by selling the business to Reliance without Amazon’s approval.
“This interim order purported to injunct a transaction between us and Reliance. Proprietary and legality demands that in such an event, the counterparty is informed about the development, however, infirm the injunction may be,” said a Future Retail spokesperson, adding that Sebi regulations are quite clear and the communication was for a legitimate purpose.
Multiple Angles
“The law apart, it is basic common sense that a counterparty is to be kept informed — not sure what approach Amazon adopts in conducting business, but this is basic courtesy covered by the law too,” the FRL spokesperson said.
A person with the knowledge of the matter said there are multiple angles involved in the case.
“What needs to be seen is whether the news itself was unpublished price sensitive information or similar to court orders that are in public domain. The trading data of the listed companies of Future Group can be analysed to understand if anyone profited through the price sensitive information,” added the person. “Also, was it possible for the accused to have accessed the information from somewhere else, like public websites or news wire reports.”
Source: Economic Times