Insider trading presumption applies when an insider trades while holding unpublished price sensitive information and fails to rebut motive.

Insider trading under Regulation 3 was analysed as prohibiting an insider from dealing in securities on the basis of unpublished price sensitive information, with the phrase "on the basis of" meaning the information in the insider's possession must have motivated the trade. Where an insider trades while in possession of such information, a rebuttable presumption arises that the trade was made on that basis, and the insider must offer a reasonable or plausible explanation showing a different motivation. The appellants were treated as insiders, had access to the relevant financial information, and did not rebut the presumption, so the finding of insider trading and the penalty were upheld.

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Issues: Whether the appellants were guilty of insider trading for dealing in the company's shares on the basis of unpublished price sensitive information.

Analysis: Regulation 3 prohibited an insider from dealing in securities on the basis of unpublished price sensitive information. The expression "on the basis of" was construed to mean that the information in the insider's possession must have motivated the trade. Where an insider trades while in possession of unpublished price sensitive information, a rebuttable presumption arises that the trade was made on that basis. The onus then lies on the insider to furnish a reasonable or plausible explanation showing that the trade was prompted by some other basis. The appellants were treated as insiders, had access to the relevant financial information, and offered no explanation to rebut the presumption. The challenge to penalty also failed because the factual foundation of insider trading remained unrebutted.

Conclusion: The appellants were held guilty of insider trading and the penalty imposed was upheld.

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