Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs25 lakh on two individuals after finding them guilty of insider trading in the shares of Nucleus Software Exports Ltd. In its adjudication order, SEBI says Anupam Gupta and his cousin, Nitin Kumar Garg, violated insider trading norms under the SEBI (Prohibition of Insider Trading) Regulations, 2015 and the SEBI Act, 1992.
In the order, Jai Sebastian, adjudicating officer (AO) of SEBI says, "It is noteworthy that the transfer undertaken of Rs500,000 by Mr Garg to the bank account of Mr Gupta on 25 May 2023 was his highest transfer in one instalment. It is a fact that on the very same date, Mr Gupta had transferred an amount of Rs700,000 to his trading account and bought shares in the scrip of Nucleus. In this context, I note that undertaking such a high-value transaction on the same date when Mr Gupta had made his largest purchase of Nucleus shares cannot be attributed to mere coincidence, especially when the information regarding the date of dissemination of the financial results of Nucleus on 26 May 2023 has been in the public domain since 18 May 2023. The timing and the amounts of money involved in the above transactions appear suspicious and cannot be explained by mere serendipity or chance. The modus operandi of these two, as observed is rather suggestive of elaborate planning undertaken by them to maximise profit in the shortest span of time. Ergo, this contention of theirs appears to be an afterthought and hence cannot be accepted."
The case stems from trades executed by Mr Gupta between 1 March 2023 and 16 June 2023, when he purchased a total of 3,020 shares of Nucleus at an average price of Rs629.73 and sold them shortly after the company announced robust financial results for the March 2023 quarter. This resulted in a profit of about Rs8.98 lakh.
SEBI’s investigation revealed that Mr Garg, who was employed as project manager in Nucleus during the relevant period, had access to unpublished price-sensitive information (UPSI) regarding the company’s financial performance. He was found to have shared this information with Mr Gupta, his cousin, through conversations and WhatsApp chats, while also providing funds routed through his own bank account and that of his father, Vijendra Nath Garg, to finance the trades.
The regulator observed that Mr Garg was aware of the sensitive nature of the information and deliberately chose to avoid trading through his own account, instructing his cousin to make the investments on his behalf. Mr Gupta, in turn, returned the money proportionately after the sale of the shares, indicating a coordinated arrangement.
SEBI dismissed the defence put forward by the two that the profits were 'accidental' and that the trades were made in good faith. Ms Sebastian concluded that the timing of the share purchases, the pattern of communication and the flow of funds could not be explained as a mere coincidence.
Holding both men liable for insider trading, SEBI imposed a penalty of Rs15 lakh on Mr Garg for communicating UPSI and Rs10 lakh on Mr Gupta for trading while in possession of such information.
The order stressed that although no direct investor losses were identified, the trades undermined the integrity and fairness of the securities market.
The case also highlights SEBI’s increasing reliance on forensic tools to detect and prove insider trading, including analysis of bank transfers, digital communications, call records and trading patterns. By establishing the misuse of UPSI and tracing how Mr Garg’s knowledge as an insider was channelled into trades executed by Mr Gupta, the regulator reinforced its message that insider trading, even within families, will not be tolerated.
