The Securities Exchange Board of India (SEBI) ordered to impound the gains gained through the trading transactions in the script of Deep Industries Limited and also held that the connectivity through Faccbook will lead to a conclusion that they are connected persons for the purpose of deciding the issue of Insider Trading.
SEBI conducted an investigation into the possible violation of insider trading in the scrip of Deep Industries Limited for the period from July 17, 2015 to October, 14, 2015. The aforesaid investigation was initiated by SEBI, pursuant to an alert generated by National Stock Exchange of India Limited (NSE) suggesting insider trading by certain entities in the scrip of DIL. On conclusion it is held that “As per Regulations 2(1)(d)(i) of SEBI (PIT) Regulations, 2015 any person who is or has during the six months prior to the concerned act been associated with a company, directly or indirectly, in any capacity including by reason of frequent communication with its officers that allows such person, directly or indirectly, access to unpublished price sensitive information or is reasonably expected to allow such access as connected person. The perusal of the provision shows that the association of the person can be direct or indirect and the association can be in any capacity which can include frequent communication with its officers by virtue of which such associated person can be reasonably expected to have access to unpublished price sensitive information. The provision, inter alia, provides for the yardstick for insiders by stipulating that insider can be by way of their association in any capacity or it can be by way of frequent communication with its officers which can also be in their social acapacity as evident in this case by frequent interactions including likes on the social media. The term officer is not defined in the SEBI (PIT) Regulations, 2015. Therefore, by virtue of regulation 2 of the SEBI (PIT) Regulations, 2015, the definition of officer as assigned in the Companies Act, 2013 is to be assigned to the word officer in SEBI (PIT) Regulations, 2015. As per section 2 (59)of the the Companies Act, 2013 “officer” includes any director, manager or key managerial personnel or any person in accordance with whose directions or instructions the Board of Directors or any one or more of the directors is or are accustomed to act. Therefore Rupeshbhai Kantilal Savla being the Managing Director of DIL is an officer of DIL. It is found that Sujay Ajitkumar Hamlai and Ajay Ajitkumar Hamlai are associated with the company in the capacity of social interaction with the MD of the DIL. Alternatively, Sujay Ajitkumar Hamlai and Ajay Ajitkumar Hamlai are associated with DIL by virtue of frequent communication with the officer of DIL, Rupeshbhai Kantilal Savla. By virtue of this association and frequent communication, they are reasonably expected to have access to the UPSI of DIL at the relevant period. Therefore, as per the provisions of Regulations 2(1)(d)(i) and 2(1)(g) of the SEBI (PIT) Regulations, 2015, Sujay Ajitkumar Hamlai and Ajay Ajitkumar Hamlai are connected persons and consequently are insiders w.r.t DIL”
This is the first order delivered by SEBI relying upon the connectivity through Facebook for deciding the issue of Insider Trading.
Read the Judgment here
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