The Securities Appellate Tribunal (SAT) has quashed the insider trading charges against Shreehas P Tambe when he was senior vice president of Biocon Ltd.
He is currently deputy chief executive of Biocon Biologics.
In addition, the appellate tribunal has also set aside the capital markets regulator Sebi's order that had restrained Tambe from accessing the securities market and prohibited him from being associated with any listed company for three months.
The latest order came following an appeal filed by Tambe against the Securities and Exchange Board of India (Sebi) order, contending that he had executed the trades while not being in possession of unpublished price-sensitive information (UPSI) and had also taken pre-clearance from Biocon Ltd as per applicable procedures.
The regulator, through an order passed in June 2021, restrained Tambe from accessing the securities market and associating with any listed public company for three months and further imposed a monetary penalty of Rs 2 lakh on him for violating insider trading rules.
Sebi, in its show-cause notice, alleged that Tambe had traded in the shares of Biocon Ltd while in possession of UPSI pertaining to the company's collaboration with Sandoz. Also, it had alleged that Tambe had sold 17,440 shares of Biocon during December 19-27, 2017, and made delayed disclosure beyond the stipulated period of 48 hours, violating the insider trading rules.
In its ruling passed last week, SAT noted that Tambe sought pre-clearance from Biocon on December 15, 2017, and December 27, 2017, to sell the shares of the company since the trading window was not closed. The company granted pre-clearance to him to sell the shares and accordingly, he sold the shares during December 19-27, 2017.
The proceeds from the sale of the shares were used to make part payment to a developer on December 28, 2017.
"We are of the opinion that the sales made by the appellant were bonafide and were made for the purpose to give advance to the developer for the purchase of a residential flat and were not motivated or induced by UPSI. Therefore, the appellant (Tambe) is not guilty of insider trading despite having traded while in possession of UPSI," SAT said in its 15-page order passed on July 27.
Since he is not guilty of insider trading and, therefore, has not violated the PIT (Prohibition of Insider Trading) Regulations nor has violated the clause of the Code of Conduct, it added.
"The charge relating to insider trading is quashed as a result the direction restraining the appellant from accessing the securities market as well as prohibiting him from being associated in any listed company, etc is set aside," SAT noted.
The tribunal noted that sales made by Tambe were required to be disclosed within two days under the certain provision of insider trading rules. Admittedly, two of the trades were not disclosed within the specified period of two days and, therefore, on this score, the penalty of Rs 1 lakh does not suffer from any error of law.
Sebi had levied a penalty on two counts -- Rs 1 lakh for insider trading charges and another Rs 1 lakh on account of delayed reporting. SAT expunged the charges related to insider trading and only upheld the capital market regulator's fine of Rs 1 lakh for delayed disclosure under the PIT rules.
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