SEBI in its order dated February 04th, 2016 In the matter of trading in the shares of Palred Technologies Limited by Mr. Palem Srikanth Reddy and 14 Others vide its order No. WTM/PS/152/IVD/FEB/2016 has observed that having “mutual friends” on Facebook will form the basis of determination and to establish connection between the parties who have committed Insider Trading in Violation of SEBI (Prohibition of Insider Trading) Regulations, 2015.
It seems to be first instance when SEBI has considered Facebook Profile as a Factor in consideration of connection between the parties for determination of Insider Trading. Earlier ITAT Delhi has admitted Linkedin Profile as additional Evidence in the case of GE Energy Parts Inc. Vs. Addl. Director of Income-tax (ITAT Delhi), ITA No. 671/Del/2011, Dated: 04-07-2014.
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Relevant Extract of SEBI Order is as follows :-
Mr. Pirani Amyn Abdul Aziz is also found to be connected to Mr. Ameen Khwaja through mutual friends on ‘Facebook’. He was employed with Deloitte Tax Services India Pvt. Limited (a group company of Deloitte Touche Tohmatsu India Pvt. Limited, which had conducted the due diligence of PTL during the slump sale). During the course of investigation, Mr. Pirani Amyn Abdul Aziz failed to reply to the specific details, as sought by SEBI.
His trading pattern was found in deviation from the established trading pattern. It was found that he had transacted only in the scrip of ‘Cummins India Limited’ for a quantity of only three shares for a consideration of ₹1,330,which he had purchased and sold during July 2013. Further, he was not found trading in any other scrip since April 2011 except that of investing about ₹5 lakh in PTL shares from June 2013 onwards, i.e., during the UPSI of ‘slump sale’. The proportion of his investment in PTL shares when considered in relation to his income and that too in a scrip which was not frequently traded (during the relevant period), is not commensurate with the usual investment behavior.
It was found that he had opened his trading account with HDFC Securities Limited on June 25, 2013, i.e. just one day prior to his trading (i.e. June 26, 2015), in the scrip of PTL. Further an analysis of his bank account details revealed that he had received a series of cash deposits, prior to each payment to his broker for transacting in the shares of PTL. Mr. Pirani Amyn Abdul Aziz has not furnished any detail of the source of such cash deposits. The same raises serious suspicion on his transactions.
The above discussion, suggests that Mr. Pirani Amyn Abdul Aziz had traded on the PSI regarding the scrip of PTL. In view of the same, he can also be considered to be an ‘insider’ in terms of the Regulations 2(e) of the PIT Regulations who had dealt in the scrip of PTL on the basis of UPSI communicated! counselled by Mr. Ameen Khwaja through Mr. Palem Srikanth Reddy.