In an interim order passed on April 16, SEBI has found that the unpublished price sensitive information (UPSI) related to material contracts procured by the company, Deep Industries Ltd. (DIL), was allegedly shared by the managing director of DIL (Director) with Sujay Hamlai (Noticee), who was associated with the former through Facebook.

Regulation 2(1)(d)(i) of the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) defines ‘connected person’ and includes a person who is expected to have reasonable access to UPSI through another, and is associated with the company in any capacity including, by being its director, officer or employee. Further, every connected person is considered as an ‘insider’ under Regulation 2(1)(g). As per SEBI, the Noticee’s act of ‘liking’ the Facebook posts of the Director, established sufficient connection between him and the Director to categorize him as an ‘insider’ under the PIT Regulations. Further, during its investigation, SEBI found that the Noticee had never traded in the scrip of DIL in past. On the basis of this connection, coupled with the unusual trades undertaken by the Noticee, directly and also indirectly through another company, V-Techweb India (in which the Noticee held 50% shareholding), SEBI held that a prima facie case for insider trading exists and passed an order for impounding the unlawful gains.

In today’s world where social networking platforms play an essential role in everyday life, any reliance on such connections should be made very carefully. Many people have millions of friends and followers on social media platforms, whom they may not even know. A number of such accounts are even fake. Therefore, such connections should not be heavily relied upon and should not form the sole basis for holding a person liable. However, a cautious use of the same as a corroborative evidence can be made, as was done in the present matter.