SEBI lets off the ‘tipper’ in Crisil insider-trading case

In a rare instance, SEBI, in an order, chose not to hold guilty a person who passed insider-trading information, saying that it had settled the same case with the person who traded using the insider information. Simply put, SEBI order with regard to insider-trading in Crisil shares took a view that it will not punish the ‘tipper’ of insider information as it had settled the case with the ‘person who used the tip to trade.’

Between November 2012 and August 2013, the sister of a tipper, who was working with Morgan Stanley India traded in Crisil shares on insider information. Trading was also done by other close family members of the person who received the tip. Morgan Stanley India at that time was managing the voluntary open offer for acquisition of Crisil. SEBI investigation revealed that one of the employee of Morgan Stanley divulged the unpublished price- sensitive information about the open offer to his family members including his sister, brother-in-law, sister’s mother-in-law and father-in-law.

SEBI’s adjudicating officer Suresh Menon held the tipper guilty of violating the prevention of insider trading regulations and the model code of conduct on insider trading, but did not penalise him. Experts say that it is surprising that the person who traded using the insider information had to pay ₹2 crore, but the person who passed the information was let off without any penalty.

“I have taken note of the fact that the Tippees (person who received the insider info) and have traded/dealt in the scrip of Crisil CRISIL during the investigation period, had filed settlement applications with SEBI. Accordingly, tippees (persons who traded using insider info) who had actually benefitted from the information, have settled the proceedings initiated against them by paying an amount of more than Rs 2 crore, which includes profit earned by them as a result of their trading and other charges, including interest etc. In his submission dated July 22, 2019, the Noticee (the morgan stanley employee) has stated that he has also resigned from Morgan Stanley with effect from December 31, 2018 and since then, he is unemployed. Therefore, in view of the above factors, I am not inclined to impose any penalty on the noticee,” SEBI officer Menon said in his order.