Mumbai, Sept 14: SEBI's petition seeking the quashing of the Appellate Authority's order in the Hindustan Lever insider trading case raises several issues of public importance. These relate to Sebi's regulatory powers as well as the scope of the penal provisions of the Sebi Act and the Insider Trading Regulations.According to Sebi, the Appellate Authority's order of July 14 "not only impinges upon the regulatory functioning of the Petitioner Board (i.e. Sebi) and severely curbs its capacity to effectively and promptly discharge its regulatory responsibilities, but cuts at the root of the basic principles of transparency and fair dealing in the securities market.''
A key issue relates to whether Sebi can use the omnibus powers under Sections 11 and 11B to direct action against insider trading when the Insider Trading Regulations (ITRs) have provisions of their own.
The following are the other main public interest queries raised by the Sebi petition in the Mumbai high court: * Whether the framing of theITR renders it impermissible for the board to exercise powers, take appropriate measures and issue appropriate directions under Section 11 and Section 11B of the parent Sebi Act.
Weather an insider having unpublished price sensitive information can use such information for obtaining an advantage in securities transactions and then claim that he is not liable to follow the remedial directions issued by the regulatory authority even though his actions violate the statutory` prohibition on Insider Trading. Whether a person engaged in insider trading may shield himself against regulatory action by claiming that the unpublished price sensitive information relied upon by him had been speculated in some newspapers. Whether Sebi is forbidden from seeking to prosecute the accused insider traders unless there is "a conclusive determination of all aspects of insider trading" as required by the Appellate Authority though there is no such requirement in the parent statute (i.e. the Sebi Act).Whether it is permissible for Sebi to issue appropriate remedial directions that are necessary to promote the interests of investors in securities and the regulation of the securities market. Whether in the Hindustan Lever case Sebi's actions can be viewed as being in excess of its jurisdiction or otherwise infirm. Whether the information available to the general public by way of speculative writing in some newspapers can be termed as "generally known" as specified in Regulation 2(k) of the ITR, particularly when the Insider has more specific information available on price-sensitive information like mergers.Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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