The Securities Appellate Tribunal has upheld SEBI's insider trading findings against a former Nucleus Software employee and his cousin. The regulator found that sharing non-public information about anticipated profits before the March 2023 results led to illegal gains. While the tribunal affirmed the violation, it reduced the penalty for the former employee from ₹15 lakh to ₹10 lakh.
The Securities Appellate Tribunal (SAT) has finalized its decision regarding an insider trading case involving Nucleus Software. The case centered on activities occurring before the company announced its financial results for the period ending March 31, 2023. SEBI had previously investigated trading patterns and found that sensitive information regarding the company's expected performance was shared before it became public.
Tribunal Finds Against Former Employee
SAT upheld the findings that an ex-employee, Nitin Kumar Garg, shared non-public information with his cousin, Anupam Gupta. This information concerned anticipated strong financial results for the company. The tribunal ruled that details discussed internally within the office regarding upcoming profit announcements and changes in annual maintenance charges are classified as unpublished price-sensitive information, or UPSI. Under market regulations, such data must not be used for trading until it is officially released to the public.
Trading Profits and Regulatory Action
Investigations revealed that Anupam Gupta purchased 3,020 shares of Nucleus Software between April 13 and May 25, 2023, at an average price of ₹629.73. Following the release of the company's financial results, which showed a significant profit increase, the shares were sold. This trading activity resulted in a profit of approximately ₹8.98 lakh. Evidence presented to the tribunal included bank records, trading logs, and communications that established the link between the internal information and the trades executed.
Admissions and Penalty Rulings
The individuals involved provided admissions during the investigation process. Nitin Kumar Garg acknowledged that he deliberately used his cousin's account to trade because he feared his own transactions would be monitored. He also admitted to funding the trades himself. In its final order, the tribunal confirmed the penalty of ₹10 lakh for Anupam Gupta. Regarding Nitin Kumar Garg, the tribunal took into account that he had already faced employment termination and had no prior record of securities law violations. Consequently, his penalty was adjusted to ₹10 lakh, down from the original ₹15 lakh imposed by SEBI.
Investors monitoring such cases often look for clarity on governance and internal controls. While this case involves specific individuals and past actions, it serves as a reminder of the strict regulations surrounding the handling of internal company information. Market participants usually track these regulatory outcomes to understand the enforcement environment and the importance of compliance for employees in listed companies.