Bagging huge orders seen as ‘price sensitive information’

In a recent order passed by an adjudicating officer (AO) of the Securities and Exchange Board of India (SEBI), an aggregate penalty of ₹2.5 million (US$41,500) was imposed on five officers of a listed company – the chairman, the vice-chairman and managing director (MD), two executive directors, and the company secretary and compliance officer.

The penalty was imposed under section 15HB of the SEBI Act, 1992, for: (1) delay in disseminating price sensitive information to the stock exchanges regarding bagging of certain orders; and (2) the company’s code of conduct not being in line with the one prescribed under the SEBI (Prohibition of Insider Trading) Regulations, 1992.

The company’s code of conduct did not take into account an amendment to the regulations on 19 November 2008, pursuant to which the dependants of directors, officers and designated employees were required to seek pre-clearance of trades from the company secretary and compliance officer.

Suhail Nathani is a partner and Yogesh Chande is an associate partner at Economic Laws Practice. This article is intended for informational purposes and does not constitute a legal opinion or advice.