Future Retail Insider Trading: SAT Overturns SEBI Decision

The Securities Appellate Tribunal has overturned a decision by the Securities and Exchange Board of India in the insider trading case related to Future Retail Ltd.

SEBI had barred Future Retail from accessing the securities market, directed it to disgorge unlawful gains, and imposed penalties.

The market regulator had investigated trading activities in Future Retail between March 10, 2017 and April 20, 2017 based on 'Unpublished Price-Sensitive Information.' The investigation revealed that certain insiders in the company traded during this period, violating SEBI regulations.

The trades coincided with a scheme of arrangement announcement on April 20, 2017, leading to a positive impact on FRL's stock.

Future Retail contested the allegations, denying trading during the UPSI period. They argued that information about the transaction was "generally available" and not UPSI.

The company's clarification to stock exchanges on March 7, 2017, regarding options for the HomeTown business was emphasised. They asserted that the HomeTown and FabFurnish businesses constituted a small part of FRL's overall business, having minimal impact on stock prices.

The SAT found fault with SEBI's conclusion that "generally available information" only referred to data disseminated on the stock exchange platform. The tribunal clarified that generally available information extends beyond the stock exchange website and includes any information accessible to the public on a non-discriminatory basis.

The appellate tribunal highlighted that news coverage stemming from interviews and statements by FRL's chairman and managing director provided specific references to the HomeTown business and the demerger of FabFurnish and HomeTown.

TV interviews on April 7, 2016 and May 5, 2016 contained crucial information about the merger and listing plans, confirming the availability of significant details in the public domain.

The Securities Appellate Tribunal observed that trading based on information available in the public domain, such as through newspaper reports or interviews, cannot be treated as trading on the basis of UPSI.

Considering these points, the tribunal found that the information related to the de-merger of Future Retail was already in the public domain. Therefore, any trading by the appellants in shares after the publication of interviews and news reports cannot be considered trading while in possession of UPSI. Consequently, the SAT quashed the SEBI order.