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3.1 Investigations revealed that Shri Samir C Arora, Head- Asian Emerging Markets at ACMSL was taking all investment decisions of the equity and balanced schemes of ACMF and was also managing the Indian allocation of Asian Funds of ACM, besides allocations for some other Asian countries.

3.2 In the course of investigations, it transpired that when ACM decided to sell its stake in ACAML, Shri Arora had reached an understanding with Henderson Global Investors for the purchase of the stake of ACM in ACAML and that his actions / inactions seemed to have been calculated to bring down the valuation of ACMF. It was found that the conduct of Shri Arora was not in consonance with the high standards of integrity, fairness and professionalism expected of a fund manager. Further, the timing and manner of disposal of ACMF's entire holdings in Digital Globalsoft smacked of Shri Arora's dealing in the security while in the knowledge of unpublished price sensitive information. Thus, there was a prima facie case of insider trading in terms of SEBI (Prohibition of Insider Trading) Regulations, 1992, by Shri Samir C Arora. It was also viewed that, Shri Arora being the fund manager at ACMF and FIIs/sub-accounts of ACM, was responsible for the non-disclosures and wrong disclosures under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and SEBI (Prohibition of Insider Trading) Regulations, 1992.

c) On October 24, 2001, ACMF held 5, 97, 178 shares of BTL. On the same day all the funds managed by Shri Samir C Arora (including ACMF) together held 9, 76, 996 shares (representing 9.48% of the paid up capital of BTL). By October 31, 2001, Shri Samir C Arora has sold 3, 74, 818 shares of BTL held by ACMF and the FII funds. Consequently their combined holding has declined to 5.84% by October 31, 2001. On November 2, 2001, Shri Samir C Arora has purchased 3, 68, 000 shares on behalf of ACMF, ILF and Northern Trust Co. , another FII managed by Shri Samir C Arora and their combined shareholding has increased to 9.42% which further increased to 10.39% on November 8, 2001 on account of purchase of 1, 00, 000 shares on behalf of ILF. On June 5, 2003, Shri Samir C Arora has sold 2, 18, 082 shares of BTL on behalf of ILF and 1, 70, 084 shares of BTL on behalf of NTC. Thus, the holding of BTL shares by ILF and NTC declined to Nil. After the above transactions, Shri Samir C Arora has sold 2, 00, 000 shares of BTL belonging to ACMF on June 9, 2003. Thus, the sale on behalf of FII funds has preceded those on behalf of ACMF. The aforesaid nature of sale and purchase of shares of various companies reveals a peculiar trading pattern which needs to be enquired into.

It is observed that Shri Samir C Arora managed the said funds, under his command, in such a manner that he could hold the equity in certain mid-cap companies in excess of the stipulated 10% by circumventing the provisions of the law. For example, the equity portfolio of ACMF and the Indian allocation of FII of ACM held more than 10% of the paid up capital of various companies like Balaji Telefilms Ltd. and Mastek Ltd. etc. I find that certain equity schemes of ACMF had invested a large portion of their corpus in five mid-cap scrips namely; Balaji Telefilms Ltd. , DGL, Mastek, United Phosphorous and Hinduja TMT Ltd. For instance, on December 31, 2002, about 43% of the corpus of Alliance New Millennium Fund (ANMF) was invested in the said five scrips. Even a diversified equity scheme like Alliance Equity Fund (which was the largest equity scheme of ACMF as on December 31, 2002 with a corpus of Rs. 433.13 crores) had invested more than 20% of its corpus, as on December 31, 2002 and February 10, 2003, in the said five scrips. About 13-14% of the corpus of Alliance Frontline Equity Fund was invested in these five scrips as on December 31, 2002 and February 10, 2003. A95 a diversified equity scheme with a large corpus (Rs. 283 crores as on December 31, 2002 and Rs. 229 crores as on February 10, 2003) had invested 15-16% of its corpus in these five scrips. Therefore, the contention that ACMF did not have significant exposure in mid cap companies is not correct.

8.17.2 I agree that in terms of the regulations the onus of making disclosures is on the mutual fund its Asset Management Company and the sponsor. It is stated that the action is not directed only against Shri Samir C Arora. Adjudication proceedings have been initiated against others concerned.

8.18.1 Shri Samir C Arora has denied "that ACMF, FIIs and sub accounts of ACM can, should or are treated as persons acting in concert or that their holdings can or should be aggregated on that basis. The shares acquired and held by such different funds, AMCs and FIIs are only for the purpose of investment and do not come within the purview of Regulation 2(e) of the Takeover Regulations".