In 2015, a whole time member of SEBI passed an order in regard to Satyam Computers (an article on that can be accessed here), whereby nine entities were charged with insider trading, were restrained from accessing the capital market, and directed to disgorge the illegal gains. Each of these entities preferred an appeal before the Securities Appellate Tribunal

The Tribunal recently passed an order in the matter upholding SEBI’s findings, in the case of all but one of the entities, that they were insiders and that they had pledged/sold the shares while in possession of UPSI. The Tribunal also made the following significant determinations that will have a significant bearing on future matters:

  • ‘Pledge’ of shares will be considered as ‘dealing in securities’ for the purposes of the Insider Trading Regulations.
  • Proceedings under the Insider Trading Regulations do not abate at the death of the alleged offender and the legal heirs can be proceeded against for the disgorgement of the unlawful gain.

Despite reaching these findings, the Tribunal chose to set aside parts of the order restraining the entities from accessing the capital markets and directing disgorgement of gains. They noted that the role played by the various entities involved in the insider trading differs substantially and a uniform restraint order, without considering the merits of each case, is not acceptable. The matter was remanded for fresh consideration by SEBI with regard to the directions to be imposed.

The dissenting opinion by one of the tribunal members raises issue with several of the findings of the majority opinion and the final decision of the majority to remand the matter. However, as the minority opinion is not binding, the matter has now been remanded to SEBI. While SAT regularly remanding matters to SEBI does result in delayed resolution of matters, in the present case, the remand may be warranted as SEBI has often been found to impose directions without considering the merits of the cases of each of the entities individually.