SAT sets aside Sebi order on insider trading in Gujarat NRE Coke

The Security Appellate Tribunal (SAT) on Friday set aside a Securities and Exchange Board of India Sebi ) order to penalise the promoters of Gujarat NRE Coke in an insider trading case.The market regulator had imposed a fine of Rs 20000000 on the promoters of the Kolkata-based company in November 2010, alleging that FCGL, a listed investment company in which they were board members, traded in the Gujarat NRE stock in September quarter of 2005, leading to substantial profits.During the same quarter, two other companies where the Gujarat NRE Coke promoters AK Jagatramka and GL Jagatramka were directors, had bought 3.500000 shares of FCGL between them. It was charged that these two firms - Marley Foods and Matangi Traders and Investors - acted on information known to the Jagatramkas, but not disclosed to public.In its nine-page order on Friday, SAT said, "The price of FCGL scrip had gone up not because it decided to dispose of its investment in the coke company but because of the fact that it acquired coal mines in Australia, an information which was price-sensitive and had been disclosed to the market. We cannot, therefore, uphold the findings of the adjudicating officer."FCGL was a core investment company having more than 90% of its assets as investment in associate or group companies, Sebi said in its order last year. FCGL was holding 17.716% shares of GNCL as on June 30, 2005 and it had disposed 84.7900000 shares of GNCL between July 18, 2005 and September 29, 2005 and the decision to sell the shares of GNCL by FCGL was taken at the FCGL's board meeting and the same was attended by GL Jagatramka and AK Jagatramka, it said.The tribunal, in its order, said, "FCGL is an investment company whose business is only to make investments in the securities of other companies. It earns income by buying and selling securities held by it as investments. This being the normal activity of an investment company, every decision by it to buy or sell its investments would have no effect, much less material, on the price of its own securities."