TaxTMI 
TaxTMI 
2022 (7) TMI 1629
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....a sum of Rs. 2 lacs for violation of Regulation 7(2)(a) of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (hereinafter referred to as 'PIT Regulations') and Clause 6 of the Minimum Standards for Code of Conduct to Regulate, Monitor and Report Trading by insiders as specified in Schedule B (hereinafter referred to as 'Code of Conduct') read with Regulation 9(1) of the PIT Regulations. 2. The facts leading to the filing of the present appeal is, that SEBI observed a rise in the scrip of Biocon Ltd. (hereinafter referred to as 'Biocon') pursuant to some public announcement that was made on January 18, 2018 regarding global collaboration between the Biocon and Sandoz. This public announcement caused fluctuations in the scrip of the Biocon by 5.6%. SEBI conducted an investigation to ascertain as to whether persons / entities have traded in the scrip of Biocon while they were in possession of Unpublished Price Sensitive Information (hereinafter referred to as 'UPSI'). 3. Based on the investigation, a show cause notice dated August 3, 2020 was issued to the appellant alleging that the information relating to collaboration with Sandoz wa....
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.... 5. The WTM after considering the material evidence on record found that the information relating to collaboration of the company with Sandoz was UPSI under Regulation 2(1)(n) of the PIT Regulations and that the three ingredients, namely, that the information directly or indirectly related to the company or its securities and that the information must not be generally available and if became available was likely to materially affect the price of the securities were all present. The WTM further found that the UPSI period did not begin from December 4, 2017 as alleged in the show cause notice but got crystalized from December 20, 2017 and the same was published on January 18, 2018. Thus, the UPSI period was from December 20, 2017 to January 18, 2018. The WTM further came to a conclusion that the appellant, being a Vice President of the company and a key managerial personnel, coupled with the fact that the company vide letter dated January 14, 2019 had informed that the appellant was aware of the proposed collaboration, held that the appellant was an insider as per the Regulation 2(1)(g) of the PIT Regulations and was also in possession of UPSI on preponderance of probability basis....
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....ssion of UPSI, we are of the opinion that the appellant is entitled to the benefit of proviso to Regulation 4(1) of the PIT Regulations. 11. Regulation 4 of the PIT Regulations prohibits any insider from trading in securities while in possession of UPSI. The proviso provides that an insider may prove his innocence by demonstrating the circumstances for trading in securities while in possession of UPSI. For facility, Regulation 4 of the PIT Regulations is extracted hereunder :- "4. (1) No insider shall trade in securities that are listed or proposed to be listed on a stock exchange when in possession of unpublished price sensitive information. [Explanation. - When a person who has traded in securities has been in possession of unpublished price sensitive information, his trades would be presumed to have been motivated by the knowledge and awareness of such information in his possession.] Provided that the insider may prove his innocence by demonstrating the circumstances including the following:- (i) the transaction is an off-market inter se transfer between [insiders] who were in possession of the same unpublished price sensitive information w....
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....on in his possession. The reasons for which he trades or the purposes to which he applies the proceeds of the transactions are not intended to be relevant for determining whether a person has violated the regulation. He traded when in possession of unpublished price sensitive information is what would need to be demonstrated at the outset to bring a charge. Once this is established, it would be open to the insider to prove his innocence by demonstrating the circumstances mentioned in the proviso, failing which he would have violated the prohibition. (2) In the case of connected person the onus of establishing, that they were not in possession of unpublished price sensitive information, shall be on such connected persons and in other cases, the onus would be on the Board. (3) The Board may specify such standards and requirements, from time to time, as it may deem necessary for the purpose of these regulations." 12. A perusal of the aforesaid Regulation indicates that no insider shall trade in securities when in possession of UPSI and a person who has traded in the securities while in possession of UPSI his trades would be presumed to have been motivated by the k....