In recent times, there has been a lot of discussion about how the regulators and the prosecution have been enormously successful in obtaining convictions in insider trading cases in the U.S. That momentum may have been somewhat restrained by a ruling of the United States Court of Appeals for the Second Circuit in United States v. Newman, et. al. In that case, analysts at several hedge funds...
SEBI Reforms – Part 1: Insider Trading
Yesterday, SEBI’s board unleashed a series of capital market reforms. These relate to insider trading, delisting, enforceability of the listing agreement and several other matters. In this post, I briefly examine the implications of the reforms on regulations pertaining to insider trading. The SEBI board has approved a new set of regulations dealing with insider trading. While the text of the...
Consequences of Inaccurate Shareholding Disclosures
Both the SEBI (Substantial Acquisition of Shares and Takeovers Regulations), 2011 (the Takeover Regulations) as well as the SEBI (Prohibition of Insider Trading) Regulations, 1992 (the PIT Regulations) require a timely disclosure of acquisition or change in shareholdings beyond certain thresholds by substantial shareholders and promoters. Such disclosure requirements are also captured in clause...
SEBI Order in the Satyam Case
Facts and Sanctions Yesterday, more than five years after the Satyam ex-chairman’s much talked about revelations, SEBI passed an order in the case against five individuals, being the ex-chairman, ex-managing director, ex-Chief Financial Officer, ex-Vice President Finance and ex-Head (Internal Audit). In the 65-page order, SEBI considers the various acts of these individuals in detail that include...
Guest Post: Disclosure of Shareholding & Insider Trading Regulations
[The following post is contributed by Yogesh Chande, Associate Partner, Economic Laws Practice. Views are personal] In an order passed by the SEBI Adjudicating Officer against an employee (Noticee) of a listed company, it was held that the “Head of Human Resources” of a particular vertical of the company is also an “officer” within the meaning of the definition of section 2(30) of the Companies...
Guest Post: Insider Trading and “Price Sensitive Information”
[The following post is contributed by Yogesh Chande, who is a Consultant with Economic Laws Practice, Advocates & Solicitors. Views of the author are personal] In a recent order passed by the Adjudicating Officer of SEBI, an aggregate penalty of INR 2.50 million was imposed on five noticees consisting of Chairman, Vice-Chairman & Managing Director, Executive Directors and the Company...
Rajat Gupta Insider Trading Case: Appellate Decision
Last week, the United States Court of Appeals for the Second Circuit issued its opinion in United States of America v. Rajat K. Gupta, in which it upheld all the findings of the district court convicting Rajat Gupta on various counts of securities fraud. Although several questions were raised in the appeal relating to the robustness of the evidence in support of the conviction, the appellate...
SAT on Insider Trading and the Role of the Compliance Officer
A couple of years ago, we had discussed the order of SEBI’s adjudicating officer imposing a penalty of Rs. 5 lakhs (Rs. 0.5 million) on the compliance officer of Satyam Computer Services Limited. We had noted that this imposed a somewhat unduly onerous obligation on compliance officers and wondered “whether a different outcome would ensue if the compliance officer in Satyam’s case were to go on...
Overhauling the Insider Trading Regulations: Part 3
[This is a continuation of two previous posts (here and here) in this series] Trading Plan The Committee has recommended the concept of a trading plan, which is novel in the Indian context but prevalent in some other jurisdictions. This concept has been recommended almost on an experimental basis, to be reconsidered by SEBI based on the initial experience. Such a trading plan has been found to be...
Overhauling the Insider Trading Regulations: Part 2
[This is a continuation of a previous post in this series] Operative Provisions The operative provisions (or charging provisions, as they are referred to by the Committee) go to the heart of the prohibition on insider trading, which also constitutes an offence for the breach thereof. The scope of insider trading usually tends to capture two somewhat distinct but related aspects: 1. The...
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