The Securities Appellate Tribunal (SAT) on Tuesday upheld a Sebi order against erstwhile Satyam Computer Services’ compliance officer, G Jayaraman, in a matter related to violation of ‘prevention of insider trading’ norms.
Last year, the Securities and Exchange Board of India (Sebi) had imposed a penalty of Rs 5 lakh on Jayaraman for failing in his duty to avoid insider trading in Satyam shares when in possession of unpublished price sensitive information related to acquisition of two firms by Satyam in December 2008.
Jayaraman had filed an appeal with SAT challenging the market regulator rulings in the case.
In an order on Tuesday, SAT said that the penalty on Jayaraman for violating ‘Prevention of Insider Trading’ rules “cannot be said to be unreasonable, especially when appellant (Jayaraman) occupying high ranking position such as Vice President - Corporate Affairs/ Global Head - Corporate Governance/ Company Secretary and Compliance Officer of Satyam was duty bound to close the trading window when in possession of unpublished price sensitive information“.
A probe by Sebi had found that on December 6, 2008, Satyam Chairman B Ramalinga Raju, called Jayaraman to his residence and informed that he was contemplating the acquisition of two firms — Maytas Properties and Maytas Infra — with a view to avoid possible takeover threat to Satyam.
Raju had later had also appraised other officers of the company about the plans and had asked them to maintain utmost confidentiality about proposed acquisitions until approved by board of directors.
According to the norms, Jayaraman as a compliance officer was obliged to keep the “trading window” closed on December 6, when in possession of unpublished price sensitive information.
Jayaraman had contended that there was no such direction from the board to him to close the trading window on December 6, 2008.
Among others, SAT has said that Satyam’s board decision to reverse on December 17, 2008 the earlier decision granting approval to the acquisition “does not absolve appellant from liability to pay penalty for violating PIT (Prevention Insider Trading) Regulations, because, once it is found that the appellant as compliance officer has failed to comply with PIT Regulations, then he is liable for penalty”.
