The Securities and Exchange Board of India (SEBI) has issued a show cause notice with Rs 96 lakh penalty to L Kishore Babu, chief financial officer of Divi’s Laboratories Ltd., and his close associates including his son for allegedly indulging in insider trading in 2017.

The market regulator has asked them to demonstrate why action should not be taken and order for disgorgement of the gains should not be passed against them in connection to the insider trading activities in the company’s scrip.

“Based on investigation conducted by SEBI, L Kishore Babu, Praveen Lingamneni, Nagesh Lingamaneni, Sri Lakshmi Lingamaneni, D Srinivasa Rao, Radhika Dronavalli, Gopichand Lingamaneni and Pushpa Latha Devi were identified as “insiders” who had, directly or indirectly, traded in the scrip during the Investigation Period,” SEBI said in its order issued on July 1.

The market regulator alleged that Divi’s, a city-based pharma company had made an announcement on July 10, 2017, during market hours that USFDA would lift import alert 99-32 on the company’s unit-II at Visakhapatnam, which was price- sensitive information.

Kishore Babu who is in a key managerial position allegedly had access to the information even before the announcement was made public, the market regulator said.

G Mahalingam, wholetime director of SEBI, who issued the orders said the persons or entities mentioned may file their replies to the regulator within 30 days from the date of receipt of this order.

They may also indicate in their replies whether they wish to avail an opportunity of personal hearing in the matter.