Insider trading is a practice which involves trading in securities of a company by any person who is or can be reasonably be believed to have unpublished price sensitive information (hereinafter referred to as “UPSI”). UPSI is unpublished information related to a company which, if it were to become public, would have the likelihood of affecting the price of securities of that company. This practice if illegal under Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act). The SEBI Act along with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (hereinafter referred to as “PIT regulations”) regulate the various aspects of this practice.
The objective of PIT regulations is to protect the innocent investors who maybe at a less advantageous position compared to those persons who have access to information which, if known to the public, would affect the prices of securities. In order to determine the liability of a person under this practice, many questions need to be answered such as, whether he or she is an insider? whether the information in question is UPSI? And so on. The regulations have been drafted with explanatory notes at every stage in order to make the interpretation of each of these terms clear. However, in the case of Shruti Vohra Vs. SEBI , a crucial question arose before the Securities Appellate Tribunal viz Whether forwarding of financial results of a company immediately after they have been prepared and before they have been formally released by the company, amounts to sharing UPSI? While the tribunal answered this question in negative, this case comment is an attempt to highlight a few aspects that it had failed to appreciate.