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 Supreme Court of India (SC) dismisses yet another Insider Trading matter of SEBI

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A SC bench headed by the CJI dismissed the appeal of SEBI in the Shruti Vora “Whatsapp Leak” case.

SEBI had previously carried out nationwide search and seizure operations seizing over 190 mobile devices to examine the WhatsApp chats based on certain news articles. The investigation of SEBI alleged that financial results of 12 companies (Bajaj Auto Ltd., Bata India Limited, Ambuja Cements Limited, Asian Paints, Wipro and Mindtree etc.) were leaked and forwarded to various market chatter groups.

SEBI concluded that the same was UPSI and imposed penalties on several individuals charging them for communication of UPSI.

In appeal, the SAT had set aside the orders of SEBI on the ground that the information itself was not UPSI, the SAT observed that “information can be branded as an unpublished price sensitive information only when the person getting the information had a knowledge that it was unpublished price sensitive information.”

In appeal by SEBI, the SC dismissed the appeals on the grounds that SEBI had pursued only secondary source of evidence and could not find the primary source observing that “…we see no reason to entertain these appeals…”. However, also observing that the appeals were “…dismissed purely in the facts and circumstances leaving all questions open.”

The SC has recently also dismissed the appeal of SEBI in the matter of Gammon Industries (Regstreet post Link: https://lnkd.in/dPFCXfSU) and had also set aside the order of SEBI in the matter of PC Jewellers (Regstreet post Link: https://lnkd.in/dGbcXjpT).

Recently, it was reported that SEBI has also moved to Ministry of Electronics and Information Technology filing an application to be notified as an enforcement agency under the IT Act, 2000.

In that background, Sumit Agrawal, Managing Partner of Regstreet Law Advisors was quoted in the The Economic Times holding the view that “the task of proving insider trading is extremely difficult and the Supreme Court judgement makes significant implications for SEBI’s enforcement. So far, only in a handful cases has SEBI been able to prove insider trading with documentary evidence and most cases depend upon circumstantial evidence. Therefore, the threshold of evidence has been increased by the Supreme Court with the recent judgement.” The article can be accessed at (https://lnkd.in/dsXTTS48).

In the coming decade, we are likely to see many judgements from the SC analysing the process of investigation and collection of evidence to assess threshold of evidence for a charge of insider trading and market manipulation.

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

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