SAT | “Forwarded as received”– Whatsapp messages needs to be proved by preponderance of probabilities for it to be deemed as unpublished price sensitive information| SEBI’s order set aside

Securities Appellate Authority (SAT): A Coram of Tarun Agarwala, J. (Presiding Officer), Dr C.K.G Nair (Member) and M.T. Joshi, J.( Judicial Member) has set aside an order passed by SEBI’s insider trading charges against employees of stockbroking firm who had ‘forwarded as received’ messages on Whatsapp regarding unpublished quarterly results of leading companies.

The pertinent question involved was:

Whether a “forwarded as received” WhatsApp message circulated on a group regarding quarterly financial results of a Company closely matching with the vital statistics, shortly after the in-house finalization of the financial results by the Company and some time before the publication/disclosure of the same by the concerned Company, would amount to an unpublished price sensitive information under the provisions of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations, 2015).

The counsel for the appellant argued that merely passing of the information without any trading in the scrips of the concerned company, would not amount to a violation of PIT Regulations. Further, that the respondents failed to prove any preponderance of probabilities that the impugned messages were unpublished price sensitive information, that the appellants knew that it was unpublished price sensitive information and with the said knowledge they or any of them had passed the said information to other parties.

SEBI while answering in affirmation had penalised the appellant for releasing Unpublished Price Sensitive Information related to financial results of Asian Paints through WhatsApp messages. Besides, other analysts from other brokerages were also fined. The Adjudicating Officer in all the proceedings before him answered the question in the affirmative and imposed a 10 penalty of Rs. 1500000/, on the appellants in each of the proceedings.

The Appellate Tribunal refuting the same, was of the opinion, “…that merely passing of the information without any trading in the scrips of the concerned company, would not amount to violation of PIT Regulations…”. Also took note of the fact, “…that trading having possession of unpublished price sensitive information is prohibited. However, since Regulation 3, PIT Regulations, 2015, clearly prohibits passing of unpublished price sensitive information otherwise than for valid reasons. However, in the facts of the case, in our view, the respondents failed to prove any preponderance of probabilities that the impugned messages were unpublished price sensitive information, that the appellants knew that it was unpublished price sensitive information and with the said knowledge they or any of them had passed the said information to other parties. Resultantly the Coram set aside the order.[Shruti Vora v. SEBI, Misc. Application No.347 of 2020 and Appeal No. 309 of 2020, decided on 22-03-2021]


Counsel for the Appellants

Somasekhar Sundaresan with Kunal Katariya, Sahebrao Wamanrao Buktare, and Ravi Vijay Ramaiya, Chartered Accountant i/b. Shah & Ramaiya Chartered Accountants for the Appellant Shruti Vora.

 Kunal Katariya with Sahebrao Wamanrao Buktare, and Ravi Vijay Ramaiya, Chartered Accountant i/b. Shah & Ramaiya Chartered Accountants for the Appellant Neeraj Kumar Agarwal.

Pesi Modi with Kunal Katariya,  Sahebrao Wamanrao Buktare and Ravi Vijay Ramaiya, Chartered Accountant i/b. Shah & Ramaiya Chartered Accountants for the Appellant Parthiv Dalal.

 Deepak Dhane, with Ramakant Kini, i/b Sterling Associates for the Appellant.

Counsel for the Respondent

Zal Andhyarujina with Suraj Choudhary, Nidhi Singh,  Maithalli Parikh,  Kinjal Bhatt,  Hersh Choudhary, i/b. Vidhii Partners for the Respondent.

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