𝐒𝐄𝐁𝐈 𝐔𝐧𝐜𝐨𝐯𝐞𝐫𝐬 𝐈𝐧𝐬𝐢𝐝𝐞𝐫 𝐓𝐫𝐚𝐝𝐢𝐧𝐠: 𝐊𝐞𝐲 𝐓𝐚𝐤𝐞𝐚𝐰𝐚𝐲𝐬 𝐚𝐧𝐝 𝐋𝐞𝐠𝐚𝐥 𝐈𝐧𝐬𝐢𝐠𝐡𝐭𝐬

Mint Newspaper (Jas Bardia and Varun Sood) has written a full page story on how SEBI tracked down an alleged insider trading case involving a former Wipro executive and an executive of Infosys. SEBI found that the executive of Infosys, who had access to unpublished price-sensitive information, tipped off the former executive of Wipro, who then executed trades in Infosys shares, making gains of Rs. 2.62 crore. SEBI imposed monetary penalty of Rs. 30 lakh on each, with a direction to disgorge his illegal gains amounting to Rs. 2.62 Crore along with interest. Further, both are restrained from accessing the securities market for one year. It may be noted that these are the allegations by SEBI and the judiciary is yet to determine the same.

In this context, Mr. Sumit Agrawal, Founder & Managing Partner of Regstreet Law Advisors, is quoted in Mint’s article titled “𝑯𝑶𝑾 𝑺𝑬𝑩𝑰 𝑻𝑹𝑨𝑪𝑲𝑬𝑫 𝑫𝑶𝑾𝑵 𝑨𝑵 𝑰𝑵𝑺𝑰𝑫𝑬𝑹 𝑻𝑹𝑨𝑫𝑬𝑹.” He pointed out that the SEBI’s surveillance system flagged unusual trading activity in Infosys shares around the 14 July 2020 announcement of the Infosys-Vanguard deal.

He further stated that . order confirms that the case originated from its alert system, not a whistleblower complaint or an employee tip-off. This triggered a preliminary examination and investigation into potential insider trading.

In relation to the remedies against the final order of SEBI., Mr. Sumit Agrawal has pointed out that both of the parties could challenge SEBI’s order by appealing to SAT again which could cover all aspects, including the imposed fine and the trading ban.

On the broader question of how companies can effectively curb insider trading, Mr. Sumit Agrawal noted that pre-empting insider trading remains a challenge, as detection typically occurs post-facto through surveillance and regulatory investigations.

There are certain inconsistencies making the SEBI order vulnerable to legal challenge, such as conflating the definitions of ‘insider’ and ‘connected person,’ despite legal precedents requiring a higher threshold, failing to establish any profit-sharing between the entities, etc that raises important questions about due process in SEBI’s enforcement actions.

Securities law enthusiasts can send their comments to Regstreet Law Advisors at info@regstreetlaw.com

A copy of the Mint story is also 𝐞𝐧𝐜𝐥𝐨𝐬𝐞𝐝 herewith.

A full text of the article can also be accessed at: https://www.livemint.com/companies/insider-trading-sebi-infosys-wipro-vanguard-contract-it-services-companies-financial-crime-11738849665103.html