In Brief
The Supreme Court examined whether non-intermediary front-running—trading ahead of known large orders by exploiting confidential information—violates SEBI regulations prohibiting fraudulent and unfair trade practices. Individual traders had obtained advance knowledge of a company's bulk stock purchases from company insiders and traded ahead, profiting from the price rises triggered by those bulk orders. The Court held that such conduct breaches securities laws. Mens rea (dishonest intent) is not required; proof by preponderance of probabilities suffices. The Court allowed three appeals by SEBI and dismissed two by the alleged traders, restoring penalties imposed by the adjudicating officer for breach of market integrity and the code of business conduct in securities markets.
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