[Aryan Rawat is a 4th year B.A. LL.B. (Hons) student at National Law University, Odisha] On 5 August 2024, the Securities and Exchange Board of India (‘SEBI’) issued a circular to all asset management companies (‘AMCs’) and mutual funds (MFs), calling upon them to establish institutional mechanisms to curb front running and fraudulent securities transactions. This circular was issued at a time...
Personal Data Breach Notifications as UPSI(?): A Safe Haven for Insider Trading
[Fathima Rena Abdulla is a 3rd-year B.A., LL.B. (Hons.) student at NUALS, Kochi] Stock market responses to cybersecurity breaches have consistently triggered negative outcomes and, consequently, opportunistic insider trading. Through timely selling before public breach announcements, insiders employ various tactics, including buying put options, making profits, or avoiding losses from the...
Flexible Trading Plans: SEBI’s Consultation Paper on Insider Trading Regulations
[Manas Rohilla and Smruti Kulkarni are 3rd year B.A., LL.B. (Hons.) students at the Gujarat National Law University, Gandhinagar] Regulators impose various restrictions and obligations on insiders of a company, such as mandatory disclosure of trades, trading window closures, contra-trade prohibitions, and the like, to prevent insider trading. However, these restrictions may also pose challenges...
Receipt of Demand Notice under IBC: Whether Price Sensitive Information?
[Ravishekhar Pandey and Amarpal Singh Dua are with MDP & Partners, Mumbai] The Securities Exchange Board of India (“SEBI”) on 12 July 2023 passed an order relating to the scrip of Shilpi Cable Technologies Limited (“STCL”) imposing penalty on the Managing Director (“MD”) as well as the Compliance Officer for violations of securities laws. In the order, the Adjudicating Officer (“AO”)...
Mutual Funds, Insider Trading and the Myth of Sisyphus
[Shruti Rajan is a partner at Trilegal] In Greek mythology, the gods condemned Sisyphus to an endless cycle of rolling a boulder up a hill, have it roll down and then start again. A parable of the interminable, eternal human struggle against the diktat of the gods, the fate of Sisyphus has long served as a metaphor for the repetitive and dogged demands of modern life and business. Introducing a...
Supreme Court on Motive as a Precondition for Insider Trading
In a significant decision in Securities and Exchange Board of India v. Abhijit Rajan (19 September 2022), the Supreme Court of India has ruled that the motive on the part of the insider to seek profits is an essential precondition for a successful insider trading charge. Such a directive from the Supreme Court is likely to have implications for insider trading cases currently within the...
Extension of Insider Trading Regulations to Mutual Funds
[Ajitesh Arya is the 4th year BA LLB (Hons.) students at NALSAR University of Law, Hyderabad] Recently, the Securities Exchange Board of India (SEBI) floated a consultation paper proposing the expansion of the SEBI (Prohibition of Insider Trading) Regulations, 2015 [Insider Trading Regulations] to encompass mutual fund units. The move is interesting as it comes in the aftermath of a front...
Supreme Court on Pledge of Shares: Insider Trading Regulations May Require Review
[Vinita Nair is a Senior Partner at Vinod Kothari & Co.] Recently, in PTC India Financial Services Limited v. Venkateshwar Kari, the Supreme Court held that ‘beneficial ownership’ in the context of the Depositories Act should not be confused with beneficial ownership under general law as it is merely a procedural precondition to sale by the pledgee. Further, the Court found that there is no...
Supreme Court Clarifies Standard of Proof in PMLA Proceedings
[Raghav Bhatia is an Advocate practising at the Supreme Court of India. Hima Prajitha is an Advocate, practising before courts in Andhra Pradesh] Recently, the Supreme Court of India in J. Sekar @ Sekar Reddy v. Directorate of Enforcement, has observed that the standard of proof in proceedings under the Prevention of Money Laundering Act, 2002 (“PMLA”) is beyond reasonable doubt and not...
SAT Expands the Scope of Exonerating Circumstances for Insider Trading
[Shubh Arora is a fourth year student at National Law University, Delhi] The Securities Appellate Tribunal (the “Tribunal”), in its ruling in Rajeev Sheth v. SEBI (19 April 2022), quashed the order of a Whole Time Member (“WTM”) of the Securities and Exchange Board of India (“SEBI”). The WTM found the Chairman of Tara Jewels Ltd., Mr. Rajeev Sheth, and his daughters, to have indulged in insider...
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