Internalized Company Performance Discussions Transferred to Third-Party Trading Accounts Constitute Violation of Insider Trading Regulations

The Appellants, Nitin Kumar Garg (an employee of Nucleus Software Exports Ltd.) and his cousin Anupam Gupta, challenged an Adjudicating Officer (AO) order dated September 23, 2025, which penalized them for insider trading.

SEBI’s investigation revealed that prior to the Company’s March 2023 financial results announcement—which showed a 209.66% year-on-year profit increase—Anupam purchased 3,020 shares based on funds and information provided by Nitin.

These shares were sold immediately after the announcement, yielding a profit of ₹8.98 Lakhs.

Nitin admitted in his statement that he used Anupam’s account to avoid detection and communicated that the company would declare "huge profit" based on internal office discussions and multifold increases in AMC costs.

1. Whether the information regarding the company's financial performance and AMC cost increases constituted "Unpublished Price Sensitive Information" (UPSI) under the PIT Regulations.

2. Whether the Appellants violated the SEBI (Prohibition of Insider Trading) Regulations, 2015, by trading while in possession of such information.

3. Whether the penalties imposed (₹15 Lakhs on Nitin and ₹10 Lakhs on Anupam) were proportionate given the circumstances.

The Tribunal applied the SEBI (Prohibition of Insider Trading) Regulations, 2015, specifically Regulation 2(1)(e) defining "generally available information", Regulation 2(1)(g) defining an "Insider", and Regulation 2(1)(n) defining "Unpublished Price Sensitive Information" (UPSI) as non-public information likely to materially affect stock prices, specifically including financial results.

The Tribunal further considered Section 15G of the SEBI Act, 1992, which prescribes penalties for insider trading, and Section 15J of the same Act, which outlines mitigating factors for determining the quantum of penalty.

The Tribunal found that the information Nitin possessed—derived from internal office discussions about impending huge profits and multifold AMC cost hikes—was not "generally available" to the public on a non-discriminatory basis.

Consequently, this information met the definition of UPSI as it materially impacted the share price (a 19.99% rise) upon disclosure.

The court noted that Nitin’s admission was pivotal; he acknowledged providing funds to Anupam and using a "mule account" specifically to circumvent trading restrictions on employees.

The WhatsApp conversations and trading patterns corroborated the admission of communication of UPSI.

While the legal violation was established, the Tribunal noted Nitin’s subsequent job loss and the lack of prior violations as mitigating factors under Section 15J.

The Tribunal dismissed Anupam Gupta's appeal (Appeal No. 532), maintaining his ₹10 Lakh penalty; however, it partially allowed Nitin Kumar Garg’s appeal (Appeal No. 531) by reducing his penalty from ₹15 Lakhs to ₹10 Lakhs, citing his removal from service and the absence of a history of securities law violations.