Supreme Court rules insider trading presumed on confidential info, profit or loss irrelevant

The core issue is whether the sale of shares during a period of unpublished price-sensitive information constitutes insider trading, regardless of whether a profit was made or a loss was avoided.

Who it concerns: Appellant: Securities and Exchange Board of India (SEBI); Respondents: Rajeev Vasant Sheth, Aarti Sheth, and Divya Sheth; Bench: Justice Sanjay Karol.

What the court decided

• The Court is reviewing the SAT's decision to set aside the SEBI Whole Time Member's order that found the respondents guilty of insider trading.
• The Court discusses the legal definition of insider trading under Section 12A of the SEBI Act and the PIT Regulations 2015.
• The Court notes that the SEBI Act does not explicitly define 'Insider Trading' but prohibits dealing in securities while in possession of material non-public information.
• The Court references Section 15G of the SEBI Act regarding penalties for insider trading, which can extend to three times the profits made or a fixed amount, whichever is higher.

Also in the document

• The SAT had previously allowed the appeal by the respondents, holding that their explanation regarding the risk of the company being downgraded to a non-performing asset was sufficient to prove innocence.
• The SAT observed that there was hardly any price difference in the company's shares on the relevant dates, suggesting the sale was not for the purpose of avoiding further losses.
• The SEBI order being challenged included directions to disgorge amounts equivalent to the loss avoided, along with interest, and monetary penalties ranging from INR 1 Lakh to INR 25 Lakh.