2014 (3) TMI 1153 - AT - SEBI

Non closing the trading window prior to the meeting of the Board of Directors of the appellant company - penalty imposed upon the appellant under Section 15HB of the SEBI Act, 1992 - HELD THAT - Show cause notice was in fact issued to the Compliance Officer of appellant, however, in that show cause notice issue relating to failure on part of Compliance Officer in not closing the trading window has not been raised. However, in the impugned order it is held that alleged violation recorded in the show cause notice against Compliance Officer does not stand established. While holding that in the facts of present case, Compliance Officer is liable for not closing the trading window, in fact it is held that Compliance Officer has not violated any of the regulations. In these circumstances, making the appellant company liable for not closing the trading window cannot be sustained. Accordingly, impugned order which purports to hold appellant company liable for not closing the trading window prior to the meeting of Board of Directors held on April 30, 2009 and November 27, 2009 is quashed and set aside.

Summary

Issues:
Challenge to adjudication order imposing penalty under Section 15HB of the SEBI Act, 1992 for not closing the trading window before Board meetings.

Analysis:
1. The appeal was filed challenging an adjudication order that imposed a penalty of Rs. 2 lac under Section 15HB of the SEBI Act, 1992 for failure to close the trading window before Board meetings held on specific dates in 2009.

2. The adjudicating officer's decision was based on the premise that the Managing Director cannot be held responsible for not closing the trading window as it is the duty of the Compliance Officer to implement the code of conduct for preventing insider trading. Therefore, the appellant company cannot be deemed liable for the same.

3. It was noted that the show cause notice was issued to the Compliance Officer, but the issue of failure to close the trading window was not specifically raised. The impugned order, however, concluded that the alleged violation by the Compliance Officer was not proven.

4. Despite determining that the Compliance Officer was responsible for not closing the trading window, it was clarified that the Compliance Officer did not breach any regulations. Consequently, holding the appellant company accountable for the same was deemed unsustainable.

5. The Tribunal quashed and set aside the impugned order dated July 26, 2013, which held the appellant company liable for not closing the trading window before the Board meetings. The appeal was allowed with no order as to costs.

This judgment highlights the importance of delineating responsibilities within a company regarding compliance with regulations, particularly in cases of alleged violations related to insider trading and the closing of trading windows before significant corporate events.