Top 5 ‘Cases’ – Insider Trading Litigations In India; learn about regulatory efforts to combat unethical conduct and breaches of insider trading laws. Gain insights into some of the most high-profile cases in India.
Insider trading is a term that has been widely debated and (rightly) demonised in the financial sector for many years.
Governmental authorities led by the Securities and Exchange Board of India (SEBI) have been combatting this issue with stringent regulations and even more stringent penalties for those who are found guilty of insider trading. In this article, we will take a closer look at the five biggest insider trading litigations in India and explore how SEBI and other regulatory bodies are working to prevent such malpractices.
These are well publicised cases and the focus of this article is to look at the regulatory reactions and penalties rather than the facts of the cases themselves. We will soon publish some details of the facts of the cases too, so stay tuned.
let’s Take A Look At Five Key Insider Trading cases in India
2007: Reliance Petroinvestments Ltd (RPIL).
The first case of insider trading involves Reliance Petroinvestments Ltd (RPIL). In 2007, SEBI launched an investigation against RPIL for allegedly indulging in insider trading. RPIL has been found to have violated insider trading regulations concerning its trading activities. SEBI has determined that RPIL earned profits of over ₹3.82 crore through these transactions. RPIL was fined ₹11 crore by SEBI for violating insider trading regulations. This was a significant penalty at the time, and it sent a strong message to other companies that SEBI was serious about enforcing insider trading regulations. Read more…
2001: Ketan Parikh:
In 2001, well known stock broker Ketan Parekh was accused of manipulating stock prices of several companies, including Global Trust Bank and Zee Telefilms. Parekh was found guilty of insider trading and was banned from trading in the stock market for 14 years. In 2018, he was found guilty under Section 24(2) of the SEBI Act, 1992. This section pertains to the consequences administered by the adjudicating officer. It is directed towards individuals who neglect to remit or adhere to any of the directives. This case was a turning point in the Indian financial sector as it highlighted the need for stronger regulations and penalties for insider trading. Read more…
The case involved allegations of insider trading against the company’s founders, Prannoy and Radhika Roy. An investigation was conducted by SEBI regarding the handling of NDTV shares by the Roys during the period of September 2006 to June 2008. The findings revealed several instances of noncompliance with insider trading regulations. SEBI had imposed a two-year ban on both individuals in 2021. It has also mandated that they return illicit profits totaling approximately ₹17 crore, which were garnered through the trading of NDTV shares. Read more…
2014, United Spirits Limited.
In 2014, SEBI launched an investigation against USL for alleged insider trading. Three individuals were found guilty of violating norms with regards to USL’s shares. The trio, it ruled, had on multiple occasions, engaged in the trading of USL scrip while in possession of undisclosed price-sensitive information (UPSI). This unethical conduct enabled them to reap illicit profits from their trades. SEBI issued a fine exceeding 3 crore in 2020, to these three individuals. In addition, the regulatory authority ordered them to return any illegal profits exceeding Rs 1 crore, along with interest. Read more…
2017, Sun Pharma Laboratories Ltd. (SPLL).
In 2017, SEBI launched an investigation against former SPLL CEO Abhay Gandhi and his wife Kiran Gandhi. The regulator found that the duo had allegedly traded in the shares of Ranbaxy Laboratories based on unpublished price sensitive information. Cumulatively, the payment of settlement charges from both parties has exceeded ₹70 lakh. Read more…
These cases highlight the some of the many reasons why insider trading compliances in India and elsewhere will continue to expand and grow. The importance of the capital markets to a healthy economy cannot be denied. At the same time, insider trading is cancerous to capital markets (read our blog about this here) and needs to be addressed. Put these together and you see why there is little choice for regulators to increase insider trading compliances and for companies to invest in the right tools to manage it.