Law: Securities and Exchange Ordinance, 1969

Section: 15,15A

Securities and Exchange Ordinance (XVII of 1969)---S. 15-A---Sale and purchase transaction through Stock Exchange by insider---Imposition of penalty---Both Textile Mills and Cotton Mills, in the present case, were Public Limited Companies listed on the Stock Exchange---During period under revision Cotton Mills sold its entire holding of shares---Trading date of the Stock Exchange for period under revision had shown that out of total sale to Textile Mills by Cotton Mills shares were purchased by insider and he also purchased shares of Textile Mills through Karachi Automated Trading System (KATS) of the Stock Exchange---Said insider was brother of Chief Executive Officer of the Textile Mills and Director of Cotton Mills---Both mills were merged and as a result of said merger, Cotton Mills was supposed to be merged into Textile Mills and Textile Mills remained as the surviving entity---Counsel for the insider had admitted that transaction in the shares of Textile Mills were conducted between the insider and Cotton Mills through a coordinated and prearranged manner and his brother who was Chief Executive Officer of Textile Mills and Director of Cotton Mills, was privy to said transaction; it was also admitted that brother of insider was operating the brokerage account of Cotton Mills---Both brothers were insiders and through their dominant, position in Textile Mills had information regarding financial performance of said mills and it was established that the trading in the shares of Textile Mills by insider in the period under revision was substantially different from the trading history of the scrip---Insider neither was an officer of both Mills nor was on Board of Directors of said companies; as a simple shareholder, he would not have had access to confidential information regarding the financial performance of the either mills directly which had clearly indicated that insider had inside information prior to the transactions based on which he placed orders to purchase shares of Textile Mills---Insider had purchased shares of mills at a significantly low price on the basis of said information regarding financial results of Mills---Total loss caused by the insider…

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