SEBI Faces Setback as Court Stays Major Insider Trading Penalty Against IEX
The Securities and Exchange Board of India (SEBI) faced a notable setback last week after the Punjab and Haryana High Court stayed a significant penalty related to insider trading. The court issued an order on April 10, staying directions originally issued by SEBI. This included the disgorgement of profits and the barring of several senior IEX officials from capital markets.SEBI has been asked to submit a formal response to IEX's petition. The legal battle is expected to be heard again later this month, keeping the regulatory fallout in sharp focus.
Core Allegations Surround Market Coupling and Price Discovery
The matter originated from an ex parte order issued by SEBI on October 10. This order targeted eight senior IEX officials, compelling them to collectively disgorge an alleged ₹173 crore in illegal gains.At the heart of the regulatory action was an order passed by the Central Electricity Regulatory Commission (CERC) in September 2025. CERC had released rules mandating companies to shift to market coupling by 2026.
Currently, the power futures trading sector lacks a uniform price discovery mechanism. Each exchange offered varying prices, creating price disparity. Market coupling is a framework designed precisely to end this divergence, ensuring uniform price discovery across all exchanges.
Regulatory Timing Sparks Insider Trading Accusations
The CERC circular providing this directive was publicly issued on July 23, 2025. IEX disclosed the development to other exchanges the following evening, on July 24.SEBI subsequently accused key IEX officials of foreknowledge. Specifically, SEBI alleged that the officials bought IEX put options between July 21 and July 23, anticipating a substantial fall in the stock price.
This order was described as a major negative for IEX because it threatened the exchange's control over price discovery within the Day Ahead Market (DAM) segment. Price uniformity would allow other exchanges to potentially gain market share from IEX.
Industry Arguments Challenging SEBI's Jurisdiction
The legal challenge primarily centers on whether the CERC order constituted Unpublished Price Sensitive Information (UPSI). IEX has argued that the order was not company-specific but applied across the entire power sector.A lawyer familiar with the matter noted that the committee for market coupling had been formed as early as 2024, and its deliberations had been public knowledge for some time. This argument formed the basis for the court's current stay of proceedings.
Initially, the circular becoming public caused a sharp 30% correction in IEX shares in a single day. Among the accused were the top three officials in IEX’s Economic Division, which handled the market coupling subject.
SEBI also extended the accusations to other affiliated entities, alleging they traded based on the anticipated hit to the share price once the order went public.
Disclaimer: Due care and diligence have been taken in compiling and presenting news and market-related content. However, errors or omissions may arise despite such efforts.
The information provided is for general informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Readers are advised to rely on their own assessment and judgment and consult appropriate financial advisers, if required, before taking any investment-related decisions.
Any views, opinions, or statements expressed, where applicable, are those of the respective analysts or experts and do not reflect the views of this website. The website has no association with such viewpoints and does not assume any responsibility for them.