The Supreme Court has refined the criteria for insider-trading liability, emphasising possession of unpublished price-sensitive information over traders’ motives, in a move likely to simplify enforcement.
The Supreme Court has sharpened the test for insider-trading liability in a way that could narrow arguments based on a trader’s supposed corporate purpose. In the Tara Jewels case, Justices Karol and Kotiswar Singh said the 2015 regulations do not invite courts to probe state of mind in the way the tribunal had suggested. Instead, the key question is whether the person traded while in possession of unpublished price-sensitive information, or UPSI, a term used in Indian securities law for material information not yet made public.
The court relied on the note to Regulation 4(1), which says the reasons for trading, or the use made of the proceeds, are not meant to matter when deciding whether the rule has been breached. That approach shifts the focus to the fact of possession and trading, rather than to explanations offered after the event. Once the regulator shows those elements, the burden moves to the insider to bring the case within the regulation’s exceptions.
The ruling sits alongside an earlier Supreme Court decision in the Abhijit Rajan matter, which had placed greater weight on motive and the purpose behind the trade. The contrast is significant because it shows the court moving away from a subjective inquiry into intent and towards a more rule-based standard. The result is likely to make enforcement simpler for regulators, while leaving less room for defendants to argue that a trade was driven by some innocent corporate objective rather than by inside information.
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