Sunday, January 13, 2019

V.K. Kaul v Sebi case brief

V.K. Kaul v Sebi case brief summary
Mr. Kaul was non-executive independent director of Ranbaxy Laboratories. It was decided that Solrex, Ranbaxy’s subsidiary would be making large amounts of investment in the scrip of the target company. This decision of Solrex to purchase shares of the target company in large quantity was price sensitive information known only to the insiders. Mr. Kaul, being an insider purchased shares of target company on behalf of his wife ahead of trading in the scrip of target company.
The court held

  1. Solrex has purchased a share of the target company.
    1. This decision is likely to materially affect the price of securities of the target company.
    2. Only insiders away about it. The decision not in the public domain.
  2. If insiders allowed to trade on basis of this information, surely it will be trading on the basis of insider information.
  3. The decision of Solrex to purchase shares of the target company is, therefore, UPSI for the insiders of Solrex.
  4. Prohibited from dealing in the shares of the target company till such information becomes public.
  5. It is not obligatory that the UPSI must be in the possession or knowledge of the target company in whose securities an insider of 'the company' deals. As long as, an insider of 'the company' deals in the securities of 'a company' listed on any stock exchange while in possession of UPSI relating to that company, the provisions of Regulation 3(i) of the regulations will get attracted.

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