Recently, the Securities Appellate Tribunal (“SAT”) overturned the Securities and Exchange Board of India's (“SEBI”) decision to prohibit Kishore Biyani, the chairperson of Future Retail, and other promoters from the securities market for a year in connection with an insider trading case. The appellate tribunal rejected SEBI's order, stating that the involved entities did not engage in trading Future Retail Ltd (“FRL”) shares based on undisclosed price-sensitive information (“UPSI”) related to demerger. According to SAT, this information was already publicly available through various media reports.
Factual Matrix
In 2017, a planned demerger by FRL lead to many proceedings. The SEBI alleged that FRL and its key figures, engaged in insider trading. SEBI alleged that, armed with secret information about the demerger, they allegedly manipulated FRL shares for illicit gains. FRL, however, contended that the demerger was no secret, it had been openly discussed and declared through official channels and media reports well before any suspected trading activity.
The ruling
In 2021, the SEBI finds FRL guilty of insider trading. SEBI imposes penalties including trading bans, hefty fines, and disgorgement of alleged illegal gains, citing the suspicious trading patterns as evidence of information access beyond public channels.However, recently in 2023, the SAT overturns SEBI's verdict. SAT rules that the demerger information was indeed publicly available through media reports, negating the premise of insider trading.
End notes
The Future Retail vs. SEBI case throws light on the intricate world of insider trading regulations, particularly when publicly available information blurs the lines. It raises crucial questions about the burden of proof in such cases and the media's role in disseminating price-sensitive information. While FRL ultimately prevailed, the case serves as a stark reminder of the delicate balance between financial information access and ethical market conduct.
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