SBI Fund Management, ING Mutual Fund (now Birla Sunlife) and BNP Paribas are among these. They are all charged with use of of price-sensitive information for trading in the scrip of Manappuram Finance (MFL) in March 2013. Notices have been also issued to Ambit Capital, its former chief executive officer, Saurabh Mukherjea, and to MFL and its top management.

This comes at a time when mutual fund houses are bleeding due to their significant exposure in crisis-hit Zee Enterprises, DHFL and IL&FS.

The Sebi notices are dated May 29 amd seek a reply in 14 days. The capital markets regulator has said these fund houses' decision to exit the stock of MFL during the period in question appears to be based on an Ambit research report, 'leaked' to them before the formal earnings announcement for the fourth quarter (Q4) of 2012-13. It was alleged the MFL management organised a conference call attended by fund managers and research analysts, where they were given the profit warning news for Q4.

According to the Sebi notice, MFL discussed the unpublished and price-sensitive information (UPSI) with Ambit on March 18 and 19, 2013, during the conference call to market participants, before this was disclosed to the stock exchanges. This is violation of the insider trading, code of corporate disclosure and listing agreements, said the notice.

Each of the entities served with a notice have to explain why an inquiry should be not held against it under Sebi’s adjudication rules. The Sebi Act prescribes a penalty for insider trading up to Rs 25 crore or three times the amount of profit made out of the illegal activity, whichever is higher. It also says insider trading is punishable with a prison term of up to 10 years.

In reply to an e-mail, a Birla Sunlife spokesperson said the Sebi notice pertained to trade done by ING Mutual Fund in March 2013 and that they we are examining the records for the period. "We bought out ING MF in October 2014," he added.

An MFL spokesperson said legal issues precluded any comment. Queries to Ambit, SBI MF and Saurabh Mukherjea did not elicit a response. BNP Paribas refused to comment.

The regulator further said the act of selectively disclosing the price-sensitive information resulted in a fraud on genuine investors who were not privy to this and who'd dealt in the scrip of MFL during March 19-20, 2013.

On MFL, Sebi said it had failed to ensure and enforce compliance with the code of conduct on insider trading. It has said MFL’s I Unikrishnan and Sachin Agarwal, in the meeting on March 18, 2013, and Ambit’s Saurabh Mukherjea and Pankaj Agarwal during the conference call on March 19 with market participants, communicated the UPSI in violation of the rules.

Further, MFL’s board of directors, including V P Nandakumar, failed to supervise implementation of the code of conduct.

Ambit had, Sebi said, communicated the UPSI by e-mail to its clients through a research report, which led to trading in the scrip by its clients and also by trading in its proprietary account. Ambit was well aware that the information was not in the public domain but still told its clients, a fraud on the uninformed investors who dealt in the scrip.

Sebi observed that on March 19, 2013, the price of an MFL share declined from Rs 34 to Rs 27.

MFL has issued a clarification and denied any such selective sharing of information. It said its people had met the Ambit analyst at 4 pm and the meeting was for seeking information on the outlook and the Q4 results. Also, that it had conducted a conference call and informed the participants that the company expected a one-time hit of Rs 250 crore during the said quarter, resulting in a loss of up to Rs 50 crore.