SAT sets aside SEBI’s insider trading order on Prannoy, Radhika Roy

Besides the Roys, SEBI also barred seven individuals and entities for insider trading in the shares of the media company for a period varying from one to two years.

SEBI, in its probe between September 2006 and June 2008, found the Roys had made illegal gains by trading in shares of NDTV when they were in possession of Unpublished Price Sensitive Information (UPSI).

The markets regulator, in its order, had referred to price sensitive information (PSI-6) relating to the NDTV board deciding to evaluate options for reorganization of the company, which could include de-merger/ split of the company into news related businesses and investments in ‘Beyond News’ businesses which are currently held through its subsidiary, NDTV Networks Plc.

SAT, in its order Thursday, referred to an earlier order in which it was found that PSI-6 was not price-sensitive information. “The trades of Prannoy Roy and Radhika Roy are during PSI-6. In Quantum Securities (Supra) we have already held that PSI-6 was not price sensitive information and, therefore, the charge of insider trading during that period cannot be sustained,” the order said.

Sebi had said that the announcement pertaining to PSI-6 was published post trading hours on April 16, 2008 at exchanges. Consequently, the trading window was required to be closed upto April 17, 2008 (till 24 hours after the UPSI was made public).

However, Prannoy Roy and Radhika Roy sold 24,10,417 and 25,03,259 shares of NDTV, respectively on April 17, 2008 in the early morning trades which was violation of Prohibition of Insider Trading (PIT) regulations.

The tribunal said that since it has already held in Quantum Securities case that PSI-6 was not a price sensitive information and that the appellants Prannoy Roy and Radhika Roy are not insiders the question of violating the NDTV’s Code of Conduct for trading during the window closure period becomes immaterial.

“We find that Prannoy Roy and Radhika Roy had secured pre-trade clearance from the Compliance Officer of NDTV which is an admitted fact in the show cause notice and, therefore, the trades executed by these two entities was in conformity with the NDTVs Code of Conduct and the PIT Regulations,” the SAT order said.

It said there is no finding in the impugned order to the effect that the compliance office had acted improperly in granting permission to Roys to sell during the period when the trading window was closed.

The impugned order passed by SEBI’s whole time member against Prannoy Roy and Radhika Roy cannot be sustained, the SAT order said.

In December last year, NDTV came under the fold of the Adani group. On December 30, AMG Media Networks Ltd, a wholly owned subsidiary Adani Enterprises Ltd, through its indirect subsidiary RRPR, acquired 27.26 per cent stake in NDTV from Radhika Roy and Prannoy Roy, resulting in a controlling stake of 64.71 per cent in NDTV by AMNL.

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