SEBI had levied a penalty of Rs. 40 crores
for insider trading on the promoters against a profit of about Rs. 14 crores.
Recently, SAT confirmed this hefty penalty. The case proves how SEBI is able to
unravel facts to the last transaction and establish relations between several
parties involved in insider trading. The case also establishes SEBI’s intention
to act tough in such cases by levying stiff penalties on promoters acting
through associates. However, the case also has some grey areas. The issues are
(i) When can price-sensitive information be
said to have arisen, particularly in case of complex transactions?
(ii) Whether purchase on negotiated terms of
a large quantity of shares from a person can be said to be a case of insider
(iii) How are the profits of insider trading
calculated – profits actually made, or should an attempt be made to quantify
the impact of price-sensitive information on the price?
(iv) Should profits made by insider trading
be disgorged and handed over to the party who may have suffered a loss?
The present case was about a tender with
electricity bodies where it may be difficult even for the management to be 100%
sure and whether initial success necessarily means ‘confirmed outcome’.
BASIC FACTS OF THE CASE
The case concerns dealings in the shares of
ICSA (India) Limited. The findings were that the promoters (consisting of
husband and wife and certain companies belonging to their group) purchased,
through certain persons, 15.86 lakh shares in February, 2009. These shares were
purchased when certain price-sensitive information was not made public.
According to SEBI’s order the price-sensitive information related to the
company being successful bidders to large contracts aggregating to Rs. 464.17
crores with various electricity bodies. The purchase price was approx. Rs. 75
per share. The shares were sold at a significant profit of about Rs. 14 crores.