In this appeal under section 15T of the Securities and Exchange Board of India Act, 1992 (the Act or simply the Act) against the order dated August 30, 2011 issued by the adjudicating officer of the Securities and Exchange Board of India (the Board) holding the appellant guilty of violating regulations 3(i) and 4 of the Securities and Exchange Board of India, the short question that arises for our consideration is whether the appellant is guilty of "insider trading."
When an insider trades or deals in securities on the basis of unpublished price sensitive information, the restriction specified in rule 3 of the regulations applies, and not otherwise. It indicates that the transactions made by the insider should be based on the knowledge they have. In the absence of evidence to the contrary, it may be assumed that an insider who trades or deals in the securities of a publicly traded firm did so on the basis of previously released price sensitive information. The onus is on the insider to provide evidence that contradicts the aforementioned inference. Regulation 3 of the rules does not apply if an insider demonstrates that he/she did not trade on the basis of unpublished price sensitive information and instead traded on some other basis.