India’s market regulator is examining Tata Sons and group companies for a major regulation violation

The Indian capital market regulator, Securities and Exchange Board of India (SEBI), is examining all events at Tata Sons and the other group companies to check violation of insider trading regulations.

SEBI is seeing if price-sensitive information was disclosed to Tata Sons directors and Tata Trusts nominees before it was approved by the boards of operating companies.

"We are taking note of the events unfolding at Tata companies and examining whether there has been any securities law violations,” a senior SEBI official told ET.

As per the rules, price-sensitive information can be shared only on a need basis and people who are not crucial should not know about it.

The SEBI got alert when ousted Tata Sons Chairman Cyrus Mistry said that Trusts' directors Nitin Nohria and Vijay Singh left a Tata Sons board meeting in progress, keeping the board waiting for almost an hour, to obtain instructions from Ratan Tata.

"Such a work pattern has also created the added risk of contravening insider-trading rules,” Mistry had said in his e-mail to Tata Board.

“Although the directors are appointed by the shareholders of the company, their primary duty is to the company and they are legally bound to act in the best interests of the company and not in the best interests of its majority shareholders,” Sandeep Parekh, founder of Finsec Law Advisors and who was an executive director of SEBI, told ET.

"Confidential information pertaining to the deal revealed by the officials of Tata Power to the board of Tata Sons violates provisions of the Companies Act as well as Sebi's insider-trading regulations,” he said.