Rajeev Vasant Sheth and family found guilty of insider trading; penalties adjusted by Supreme Court after SEBI's appeal.
In a landmark decision, the Supreme Court of India has upheld the Securities and Exchange Board of India's (SEBI) findings against Rajeev Vasant Sheth and his family for insider trading, with some modifications to the original penalties imposed. This ruling comes after SEBI appealed the decision of the Securities Appellate Tribunal (SAT), which had previously overturned SEBI’s orders.
The case revolved around allegations that Mr. Rajeev Vasant Sheth, Chairman and Managing Director of Tara Jewels Limited (TJL), along with his family members, engaged in insider trading by selling shares of TJL while in possession of Unpublished Price Sensitive Information (UPSI). During the UPSI period from October 2, 2017, to November 29, 2017, Mr. Sheth sold a significant number of shares, avoiding substantial losses.
The Supreme Court, in its judgment delivered by Justices Sanjay Karol and Nongmeikapam Kotiswar Singh, reaffirmed the presumption under Regulation 4(1) of the SEBI (Prohibition of Insider Trading) Regulations, 2015, which states that trades conducted while in possession of UPSI are presumed to be motivated by that information. The Court emphasized that the purpose of the proceeds from such trades is irrelevant.
While SEBI's initial penalty on Mr. Sheth was INR 25 lakh, the Supreme Court, considering the circumstances of the case, reduced this to INR 10 lakh. The Court noted that while the respondents were indeed in possession of UPSI and traded shares during that time, the penalty needed adjustment based on a cumulative view of the case facts.
The Supreme Court also restored SEBI's order for disgorgement, which involves Mr. Sheth and his family returning approximately INR 1.38 crores, the amount avoided in losses, to be credited to the Investor Education and Protection Fund (IEPF).
This decision underscores the Supreme Court's commitment to upholding stringent insider trading regulations, ensuring market integrity, and protecting investor interests.
Statutory provision(s):
Sections 12A(d), 15G, 15HB, and 11B of the Securities and Exchange Board of India Act, 1992; Regulation 4(1) of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.
Securities And Exchange Board of India v. Rajeev Vasant Sheth, (SC) : Law Finder Doc id # 2958945
