The Securities Appellate Tribunal issued an order dated July 26, 2016, in the matter of Man Industries (India) Limited (MIL), upholding a penalty of Rs. 25 lakhs (2.5 million) for violation of immediate and continuous disclosure norms under the SEBI (Prevention of Insider Trading) Regulations, 2015. MIL had delayed the disclosure of two material contracts by 59 and 7 days respectively, which led to a fluctuation in its scrip price.

MIL had contended that the contracts were subject to amendments and were not effective on the date of signing of the contracts, pre-disclosure of an event could result in violation of the SEBI (ICDR) Regulations, 2009, and that all contracts involving large sums of money were not price sensitive information. However, SAT held that information which entails an amount of more than 50% of the annual order book of MIL and which, when disclosed can actually move the prices higher by 4.74%, is a price sensitive information under the Insider Trading Regulations. Holding that the contract did not differentiate between the date of signing and its effectiveness, SAT stated that it is the responsibility of MIL to prove that the initial disclosures were true, and that there is a genuine, subsequent change in the contract, which should be duly disclosed. SAT noticed that MIL had committed a similar violation and been penalized previously. Accordingly, SAT found the penalty of Rs. 25 lakhs to be justified.

Earlier, disclosures were made on occurrence and completion of an event, which was misused by certain companies who leaked material information through media, without informing the investors first. Subsequently, SEBI introduced continuous disclosure requirements under the Insider Trading Regulations. SAT’s ruling is in line with the rationale behind such change.