Sebi case law

SEBI vide its order dated August 19, 2015 imposed a penalty of Rs. 10 lakhs on the Director of Manappuram Finance Limited for breach of SEBI (Prohibition of Insider Trading) Regulations. The brief facts of the case are as follows :

1. The wife of the Directors sold shares of the Company without seeking pre-clearance from the Compliance Officer.

2. The Director submitted that 

(i) his wife was financially independent 

(ii) trading without pre-clearance was only a technically slip that would not warrant any penalty - an opinion from reputed law firm was also submitted to support these views.

 (iii) he had discussed at the board meeting of the Company about the intention of his wife to sell the shares of the Company.

3. SEBI observed and ruled that 

(i) financial independence is immaterial in case of spouse 

(ii) trading without pre-clearance is a violation of regulation and hence penalty would follow 

(iii) the discussion of the wife proposed trade at the board meeting is not substantiated with agenda or minutes of the meeting and 

(iv) penalized the Director for violation of Regulations and Internal code of conduct.

Key Take away : Personal Transaction Policy and SEBI Insider Trading norms need to be followed in letter and spirit. SEBI does not take into account any technicalities or intention of the parties. You may note that the Director in this case was about 90 years old retired civil servant without any blemish but still had been penalized for the unintentional error.