Insider trading is emerging to be one of the most prominently scrutinised cases of violations by market regulator Securities and Exchange Board of India. Data from the regulator’s annual reports for the last five years indicate an increase in the scrutiny of alleged cases of violations of insider trading regulations.
Sebi took up 70 cases for investigation related to insider trading in fiscal 2019 — an over fourfold increase from the number reported the previous year. In the past couple of years, several who’s who of India Inc have settled allegations of insider trading with Sebi — Sun Pharma along with Dilip Shanghvi and some of its directors, Kiran Mazumdar-Shaw, Rakesh Jhunjhunwala, Bharti Airtel’s promoter firm Indian Continent Investment, Ambit Capital as well as state-owned General Insurance Company and New India Assurance. Sebi regulations allow for settlement of insider trading violation cases through payment of charges without admitting or denying the findings of fact and conclusion of law.
A content analysis of the Sebi annual reports also reveals the steady increase in the occurrence of the words ‘insider trading’. In the FY19 annual report, the term ‘insider trading’ has occurred 35 times — the highest in the past three reports.
ET Bureau
In the five years from FY15 to FY19, Sebi took up 141 cases of insider trading violations for investigations, but completed only half of those probes. In some instances, the Securities Appellate Tribunal (SAT) has overturned the regulator’s punitive action. For example, in May last year, the SAT dropped insider trading charge and penalty that Sebi had levied on Piramal Enterprises and its promoters in 2016.
Sebi’s annual reports mention certain discerning instances of violation of insider trading regulations ranging in variety, from executives dealing in the shares of their company while being in possession of unpublished price-sensitive information (UPSI), trading in shares by the in-laws and immediate relatives of executive or non-executive directors during the UPSI period, trading in shares by individuals known to be friends with a company’s managing director and his wife on social media, to an executive director passing on UPSI to a research analyst, who then published a research report giving recommendations on the scrip to his clients.
The insider trading regulations have also evolved over the years. The erstwhile Sebi (prohibition of insider trading) regulations, 1992, were repealed and replaced with Sebi (prohibition of insider trading) regulations, 2015. Further in 2017, Sebi appointed a fair market conduct committee under TK Viswanathan for improving the insider trading regulations. Based on its recommendations, the regulations were further amended and made effective from April 2019. Access to call data records, scraping of social media information and reporting of trades and access to records of the personal information of employees and their immediate relatives widen the resources available to Sebi to investigate on insider trading.
Source: Economic Times
