UPSI: SC junks Sebi plea in Bajaj Auto case | The Financial Express

UPSI: SC junks Sebi plea in Bajaj Auto case

UPSI refers to any information related to a company or its securities that is not generally available and is likely to materially affect the price of the securities.

UPSI: SC junks Sebi plea in Bajaj Auto case
A Bench led by Chief Justice UU Lalit dismissed the Sebi’s appeal against the Securities Appellate Tribunal’s (SAT) order in March last year that had set aside the penalty of Rs 15 lakh imposed on Shruti Vora for allegedly forwarding UPSI of six companies on WhatsApp. (IE)

The Supreme Court on Monday rejected the Sebi’s appeal seeking to penalise a former stock broker in the case of circulation of unpublished price sensitive information (UPSI) through WhatsApp messages in the scrip of Bajaj Auto.

A Bench led by Chief Justice UU Lalit dismissed the Sebi’s appeal against the Securities Appellate Tribunal’s (SAT) order in March last year that had set aside the penalty of Rs 15 lakh imposed on Shruti Vora for allegedly forwarding UPSI of six companies on WhatsApp.

It also observed that the two individuals – Neeraj Kumar Agarwal and Shruti Vora – then employees of Antique Stock Broking, had forwarded the messages and the SAT had quashed the penalty of Rs 15 lakh imposed on them for circulating UPSI related to quarterly results of Bajaj Auto through WhatsApp prior to official announcement by the company.

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“They are secondary chain. They have just forwarded the messages. It would mean upsetting everything and putting the burden again on them, which we are not willing to do… On the facts and circumstances of the case, we find no reason to entertain the appeal,” the CJI said, adding that the investigative machinery was not able to find the source of information.

UPSI refers to any information related to a company or its securities that is not generally available and is likely to materially affect the price of the securities.

Senior counsel CU Singh, appearing for Sebi, argued that the identified messages “accurately” matched the financial results finally published by the companies and as per the PIT norms, any person who is in possession of UPSI is regarded as an insider. He said that Vora being insider (stock broker) had communicated the UPSI related to Bajaj Auto as she was also advising insurance companies. This is in violation of PIT (Prohibition of Insider Trading) Regulations, he contended.

Sebi had initiated a preliminary examination on circulation of UPSI through WhatsApp groups, during which search and seizure operations for 26 entities were conducted and approximately 190 devices, records etc, were seized. The investigation revealed that Kumar and Vora communicated the UPSI related to Bajaj Auto – total income, EBITDA and PAT for the quarter ended March 2017 a few days before the results were due. Bajaj Auto was one of the firms whose quarterly financial results for the fourth quarter of 2016-17 closely matched the messages circulated in the WhatsApp chats.

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SAT, while ruling in favour of the two individuals, had observed that the source of these messages could not be established by Sebi and it could not find any leakage of information. It had accepted the stand of Vora and Agarwal that the messages had originated from brokerage houses or some platforms and were already available in the public domain.

The tribunal had held that ‘information constituted UPSI only when the person getting such information was aware that such information was unpublished, and price sensitive in nature’ and that such knowledge can be established on the basis of preponderance of probabilities on attendant circumstances.

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