In Brief
This case addresses whether non-intermediary front-running—trading ahead of bulk orders using insider information—is prohibited under SEBI's Fraudulent and Unfair Trade Practices Regulations. Employees of investment firms tipped off family members about forthcoming trades; those tipped parties then bought shares moments before the bulk orders, profiting when prices rose. The Supreme Court held that such tippee trading constitutes fraud under the Regulations, even though the tippees were not securities intermediaries. The Court required proof that the tipper owed a duty of confidence, the tippee knew of the breach, and the conduct induced others to deal at different prices. The standard of proof is preponderance of probabilities, not beyond reasonable doubt. Civil Appeals 2595, 2596, and 2666 of 2013 were allowed; Appeals 5829 of 2014 and 11195-11196 of 2014 were dismissed."
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