Background The legal regime governing insider trading in India is at least two decades old. The SEBI (Prohibition of Insider Trading) Regulations, 1992 were one of the initial few regulations that were prescribed by SEBI upon its establishment. However, the experience regarding the implementation of the legal regime on insider trading has been fraught with considerable difficulties. Although...
Securities Laws Amendment Ordinance: An Overview
As some of us have observed time and again on this Blog, the substantive aspects of securities regulation have become progressively extensive and sophisticated in India. Over the last two decades of SEBI’s functioning, it has constantly updated securities laws to meet with market developments, whether it is in the primary markets (IPOs, QIPs, etc.) or in the secondary markets (insider trading...
Miscellaneous
1. Exemption from Takeover Regulations for Gift of Shares to Family Trust SEBI has granted an exemption to an acquirer from making an open offer under the SEBI Takeover Regulations in the case involving Gujarat Organics Limited (the company). In that case, the promoter Mr. Ashwin S. Dani, owns 71.15% shares in the company, and proposes to transfer...
SEBI Adjudication Order in the IPCL Insider Trading Case
SEBI’s adjudicating officer yesterday passed an order exonerating Mr. Manoj H. Modi (MHM) and Mrs. Smita M. Modi (SMM) for insider trading charges in connection with the shares of Indian Petrochemicals Corporation Limited (IPCL). It deals with two primary legal questions as they were applied to the facts of the case, i.e. (i) whether MHM and SMM are “insiders” with respect to IPCL; and (ii)...
Review of Insider Trading Regulations
SEBI has constituted a committee to review its regulations on insider trading. The committee is chaired by Justice N.K. Sodhi, retired Chief Justice of the Karnataka High Court and former Presiding Officer of the Securities Appellate Tribunal (SAT). The review comes two decades after SEBI’s Insider Trading Regulations were enacted in 1992. The initial decade witnessed very few investigations...
Rajat Gupta’s Sentencing Order
The order of the United States District Court, Southern District of New York, sentencing Rajat Gupta to 2 years’ imprisonment and US$ 5 million fine for insider trading is one that is carefully crafted and likely to be of significance in sentencing jurisprudence as far as securities law violations are concerned. The order, pronounced by Judge Rakoff is detailed and well-considered, given that the...
Insider Trading and “UPSI”: Another SAT Order
Apart from the evidentiary aspects of the insider trading, which are quite challenging (as discussed on this Blog and in this episode on CNBC), the substantive aspects of the violation are equally daunting for regulators as they require several prongs to be established. At the same time, it is sufficient for the alleged violator to demonstrate the failure of any one of the prongs to demolish the...
Insider Trading Enforcement
Rajat Gupta’s conviction by a New York court for insider trading has sparked off a debate about the state of insider trading enforcement in India. While several cases have been pursued by SEBI in the last two decades since insider trading has been prohibited by regulation, the rate of successful convictions or regulatory sanctions has been minimal. An editorial in the Business Standard states...
SAT on Scope of Insider Trading
In the past, the SEBI regulations against insider trading were attracted only if the insider traded “on the basis of” unpublished price sensitive information (UPSI). Since it became unduly onerous on SEBI to prove that the trading was “on the basis of UPSI”, regulation 3 was amended to provide that an insider trading offence would be committed if the trading was carried out merely “when in...
Insider Trading: Role of the Compliance Officer
A few years ago, SEBI’s Insider Trading Regulations were amended to specifically introduce the concept of self-regulation as a mechanism to enforce prohibitions on insider trading in companies. This particularly applies to trading by company insiders (such as directors and employees) in shares of a company prior to significant announcements. In that set of amendments, SEBI prescribed a model code...
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