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2012 (1) TMI 350 - AT - Companies LawInsider trading - Selling the shares during the unpublished price sensitive information (UPSI) period - Violation of the PIT Regulations 1992 - according to the Board, the appellant was deemed to be a connected person with the company and its directors who had access to US PI and hence an insider. The appellant is alleged to have traded in the scrip of the company based on the (UP SI) relating to financial results. Hence, it was alleged that the appellant had violated regulation 3(i), (ii) and 4 of the regulations. After considering the reply of the appellant and granting personal hearing, the adjudicating officer found the appellant guilty and, by the impugned order, imposed penalty as stated above. Hence, this appeal. HELD THAT:- the appellant in the present case has placed sufficient material on record to show that she has not traded on the basis of US PI. It is also a matter of record that the appellant used to trade regularly in the shares of the company and her trades were genuine transactions carried out by her in the normal course of business. the appellant that where an entity is privy to USPI, it will tend to purchase shares and not sell the shares prior to the US PI becoming public if the information is positive. In this case declaration of financial results, dividend and bonus were positive information but the appellant not only bought but also sold the shares not only during the period when the price sensitive information was unpublished but also prior to and after the information becoming public. A person who is in possession of US PI which, on becoming public is likely to cause a positive impact on the price of the scrip, would only buy shares and would not sell the shares before the US PI becomes public and would immediately offload the shares post the information becoming public. This is not so in the case under consideration. The trading pattern of the appellant, as shown in the chart above, does not lead to the conclusion that the appellant’s trades were induced by the US PI. Further, appellants in that appeal only purchased the shares while in possession of US PI and there was no trading by them prior to or after the information becoming public. In the case in hand the charge of trading on the basis of US PI has not only been denied by the appellant, it has also been able to demonstrate through her trading pattern that the trading was not based on the US PI. the appeal is allowed and impugned order set aside with no order as to costs.
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