Parties involved:
1. Reliance Industries Limited (Noticee 1)
2. Compliance Officer, Ms Savithri Parekh (Noticee 2)
3. Compliance Officer, Mr K. Sethuraman (Noticee 3)
The issues that arise for consideration in the present case are:
a) Whether Noticee 1, 2 and 3 have violated the SEBI Regulations by not disclosing or clarifying to the Stock Exchange the UPSI relating to JIO Facebook deal which got disclosed through the publication in the newspaper?
b) Whether Noticee 2 have violated SEBI Regulations by not closing the trading window with respect to the UPSIs?
The Noticees deny the allegations made by SEBI in the Notice on the following grounds:
1. Alleged violation of Regulation 30(11) of the LODR Regulations
SEBI Regulations does not impose any strict obligation on a listed entity, but rather, provides an avenue for voluntary action on the part of a listed entity, at its discretion, to clarify its stand/position on media or other reports and RIL further stated that it would be impossible for them to track every news report and confirm/deny the same.
2. Alleged violation of Principle No. 4 of Schedule A of PIT Regulations
RIL stated that in terms of Principle No. 1 of Schedule A, only credible and concrete UPSI shall be disseminated to Stock Exchanges.
However, Principle No. 4 of Schedule A mandates that Every UPSI needs to be disclosed.
RIL on the basis of harmonious construction, interpreted that information regarding the deal was not credible and concrete as on the date of publication of the report in the Financial Times, due diligence was still ongoing in connection with the deal, and the parties were yet to even agree on the final valuation and value of the investment by Facebook.
3. Closure of Trading Window
a) there is no SEBI regulation or standard which requires notification of trading window closure period to the Stock Exchanges
b) the Reliance Code prohibits all employees in possession of UPSI from trading in RIL’s securities
c) The designated persons who had access to these UPSI were already in the know that they cannot trade while in possession of these UPSI.
d) The Special Category Persons were specifically informed by their immediate reporting heads that the information is UPSI and that they should keep the UPSI confidential.
JUDGEMENT OF SEBI
- SEBI is not convinced that the Company can abdicate its responsibility to verify a news article that has appeared in the newspaper. The Company has clearly failed to keep secrecy of information and when the bits of UPSI became selectively available, the Company abdicated its responsibility to verify and come clean on the unverified information that was floating around.
- SEBI clarified that the principle of harmonious constructions is the bedrock of legislative interpretation. However, it cannot be selectively used solely for the purposes of deriving benefit from it, which in this case the Noticees are attempting to do.
- Company had implemented the Policy for insider trading regulations designed by it, so Company secretary is not liable for any violations of not having closing the trading window.
- SEBI imposed the penalty of Rs. 30,00,000 on Noticee 1, Noticee 2 and Noticee 3 to be paid jointly and severally.
Author Bio
