SEBI's investigation covered trading in JSPL shares between 1 June 2023 and 31 August 2023. The company's trading window was closed from 1 July 2023 until 13 August 2023 in connection with the financial results for the quarter ended June 2023. Despite the closure, both Mr Gupta and Mr Sowatia traded in the company's scrip. They also executed trades above the prescribed threshold without obtaining pre-clearance from the company.
Under JSPL's code of conduct, designated persons were required to obtain pre-clearance before trading if the proposed transaction exceeded 1,000 shares or an aggregate market value of ₹1 lakh. The code also prohibited designated persons and their immediate relatives from trading in the company's securities during the closed trading window.
The trading records showed that Mr Gupta undertook several transactions during the window-closure period, including stock options and equity trades. He also carried out transactions in JSPL shares after the trading window reopened, including purchases and sales on 14th August, 16th August, 29th August and 30 August 2023, without obtaining pre-clearance. Mr Sowatia too undertook several trades, including transactions on 14th August, 24th August and 29 August 2023, without the required pre-clearance.
Both argued that the violations were inadvertent and resulted from a misunderstanding of the compliance requirements. They maintained that they had neither possessed nor traded on unpublished price-sensitive information (UPSI). Mr Gupta said he was working as vice president (Electrical) at JSPL's Angul plant and was not involved in finance or preparation of financial results. Mr Sowatia also said he was working in plant operations and was unaware of his classification as a designated person.
SEBI rejected these submissions. The adjudicating officer (AO) of SEBI, Jai Sebastian, noted that Mr Sowatia had been identified as a designated person in the company's compliance records and had also received an email informing him that the trading window would remain closed until 48 hours after the financial results became generally available.
SEBI further held that the obligations applicable to a designated person do not depend on whether the individual personally understands or acknowledges the restrictions. Designated persons are expected to exercise due care and verify whether the trading window is open and whether a proposed trade requires pre-clearance. SEBI AO said that lack of intention or inadvertence cannot be accepted as a defence once the regulatory violation is established.
While deciding the penalty, SEBI noted that the available records did not establish any disproportionate gain or investor loss arising from the violations. It also noted that there was no previous SEBI penalty against the two individuals. Their cooperation and personal circumstances were taken into account while determining the penalty.
SEBI concluded that Mr Gupta and Mr Sowatia had violated clauses 4 and 6 of Schedule B read with regulation 9(1) of the SEBI (Prohibition of Insider Trading) Regulations, 2015. They have been directed to pay ₹1 lakh each.
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