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SEBI’s handling of insider trading cases under spotlight

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Ashley Coutinho of The Financial Express (India) today has discussed how recent judgements of the Supreme Court of India against SEBI in insider trading cases has raised the fundamental questions on applicability of Insider Trading law.

This week the Supreme Court of India in the matter of SEBI v. Shruti Vora & Ors. ruled in the favour of the Shruti Vora who was accused of forwarding unpublished price sensitive information (UPSI) over WhatsApp. It was alleged that she had circulated UPSI regarding financial results of Bajaj Auto Ltd before it was made public and thus, violated PIT Regulations. However, the Securities Appellate Tribunal had set aside the SEBI order.

The judgement of the Supreme Court of India has come within days of its order in Gammon Infrastructure Projects Limited insider trading order (our analysis at –  https://lnkd.in/dPFCXfSU) where it held that motive is essential to determine whether a person undertook trade in violation of PIT Regulations.

Further, in the recent PC Jeweller Ltd order, the Supreme Court of India had again overturned the order of SEBI and held that trading patterns in absence of material on record to establish communication of UPSI cannot lead to imposition of penalty under PIT Regulations (our analysis at –  https://lnkd.in/dGbcXjpT)

In light of the above judgements, Mr. Sumit Agrawal, Managing Partner, Regstreet Law Advisors and former SEBI Officer viewed that, “In insider trading cases, gathering evidence of ‘connection’ and ‘communication’ is a daunting task for regulators worldwide, but one that cannot be done away with ‘assumption’ and ‘speculation’. The recent SC judgments are a reminder to consider the element of ‘knowledge’ and ‘motive’ in the context of serious charges of insider trading, which is a civil and criminal offence.” He further opined that, “It is hoped that SEBI and the stock exchanges would take these judgments as a learning rather than viewing these judgments in specific facts (and not as a principle to be followed) or amending the regulations with external credibility.”

The Financial Express (India) (story at: https://lnkd.in/dPSST4RQ) has also quoted expert views of Ms. Rachna Jain of Desai & Diwanji, Mr. Tejesh Chitlangi of IC Universal Legal, Advocates & Solicitors, Mr. Gaurav Mistry of DSK Legal, and Mr. Manshoor Nazki of IndusLaw.

Readers can share their views on the recent judgements with Regstreet Law Advisors at info@regstreetlaw.com

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