When SEBI Reviews Its Own Exoneration: The IOCL Insider Trading Revision Order

Primary source: SEBI, Order under Section 15-I(3) read with Section 19 of the SEBI Act, 1992, in the matter of suspected insider trading activity of certain entities in the scrip of Indian Oil Corporation Ltd., dated 13 August 2026 (WTM/KV/IVD-2/ID18/32658/2026-27).

Most of the SEBI orders we cover in this space are Adjudicating Officer orders finding a violation. This one runs the other way: SEBI's own Whole Time Member reviewed — and upheld — an Adjudicating Officer's decision to exonerate three noticees of insider trading in Indian Oil Corporation Ltd. shares. It is a rare, useful look at two things compliance officers don't often get to see spelled out: the internal check SEBI applies to its own AO orders, and exactly what kind of circumstantial evidence is — and isn't — enough to sustain an insider trading charge.

Why this matters

Compliance teams tend to focus on what gets a designated person or their relative into trouble. This order is instructive for the opposite reason: it shows, in granular detail, the kind of fact pattern that looks suspicious on the surface (a family member of an insider trading heavily around a results announcement) but that SEBI's own AO — and then SEBI's WTM on review — found did not cross the threshold for a violation. Understanding where that line sits is directly useful when you are assessing your own designated persons' trading patterns, deciding whether to escalate a suspicious pattern internally, or explaining to a board why a particular trade did or didn't warrant a referral.

The underlying facts

Indian Oil Corporation Ltd. announced its Q2 FY2023-24 results and a 50% interim dividend on 31 October 2023. Arun Kumar Somani, a Senior Finance Manager (Taxation) at IOCL and a designated employee involved in finalising the limited review, received an email containing the unpublished quarterly financial results on Saturday, 21 October 2023. His in-laws — Ramesh Chand Gupta and Tara Devi Gupta — traded heavily in IOCL shares in the derivatives segment between 23 and 26 October 2023, making profits of ₹16.70 lakh and ₹10.48 lakh respectively. SEBI's investigation alleged that Somani had tipped off his in-laws, in violation of Regulation 3(1) (communicating UPSI) and Regulation 4 (trading while in possession of UPSI).

The Adjudicating Officer's August 2025 order exonerated all three. The AO accepted that Somani was an insider in possession of UPSI, but found no direct evidence that he communicated it to Gupta, and — critically — found the circumstantial case too thin: the Guptas had taken positions in IOCL well before the UPSI came into existence, traded IOCL derivatives regularly and in volume both before and after the investigation period (including years with net losses), and a joint family trip the parties took to Ahmedabad during the period was explained as a religious festival visit rather than evidence of a tip-off, given they already lived in the same building. The 2024 amendment widening "relative" to include parents-in-law was also held inapplicable, since it postdated the investigation period and does not operate retrospectively.

How the revision proceeding worked

Because the AO order let the noticees off, SEBI's Whole Time Member took the matter up under Section 15-I(3), which allows the Board to call for and examine the record of an AO's proceedings and enhance a penalty (or otherwise interfere) if the order is "erroneous to the extent it is not in the interest of the securities market." This is not a routine step — most exoneration orders are not revisited — and the WTM's order is unusually careful about articulating the limits of this power before applying it.

Drawing on Supreme Court income-tax jurisprudence on an analogous revisional provision (CIT v. Amitabh Bachchan and CIT v. Max India Ltd., both interpreting Section 263 of the Income Tax Act), the WTM held that a revisional authority under Section 15-I(3) is not an appellate authority. It cannot substitute its own view for the AO's merely because another view of the same facts is possible; it may interfere only where the AO's findings are perverse, arbitrary, or reflect a wrong application of law. Applying that standard, the WTM found the AO's reasoning was reached "after due examination of material available on record" and was not unreasonable — and accordingly declined to interfere, upholding the exoneration in full.

What SEBI intends

This is SEBI building institutional discipline into its own enforcement machinery. Section 15-I(3) exists precisely so that a WTM can correct an AO order that let a genuinely culpable party off on a technicality or an unreasonably generous reading of the evidence — but if the WTM used that power to simply re-weigh the same facts and reach a stricter conclusion whenever it disagreed, AO adjudications would offer noticees no real finality, and the AO's fact-finding role would be hollowed out. By importing the tax-law standard of "erroneous and prejudicial," the WTM is signalling that revision is reserved for AO orders that are actually wrong in law or unreasonable on the record — not for cases where SEBI's leadership would simply have called it differently. Practical takeaway: an AO exoneration is not necessarily the last word if the underlying reasoning is weak, but a well-reasoned exoneration — even one dealing with an insider's close relatives trading heavily around a results announcement — can and will stand. Don't assume every family-trading pattern that looks bad on a heatmap is destined for escalation to a violation finding; the actual evidentiary bar is higher than optics alone.

What counts (and doesn't) as proof of tipping

The evidentiary reasoning upheld here is worth internalising for anyone who reviews designated-person trading alerts. Proximity and frequent contact between an insider and a relative-trader — living in the same building, taking a family trip together during the UPSI window — was not, standing alone, treated as sufficient to infer that UPSI was passed on, particularly where an innocent explanation (a religious festival) was available and no financial dependency or advisory relationship was shown between the parties. Equally important: a trading pattern that is unusual only when viewed in isolation, but consistent with the trader's established, long-running trading behaviour in the same scrip (including loss-making periods), works against — not for — an inference of UPSI-driven trading. And positions opened before the UPSI came into existence undercut any claim that later trades in the same direction were prompted by the tip.

What SEBI intends

SEBI's insider trading cases increasingly rely on "preponderance of probability" rather than direct documentary proof of a tip-off — call records, message logs, or an admission are rare. That makes it essential that the standard not collapse into guilt-by-relationship. By accepting the AO's emphasis on baseline trading behaviour, timing of position-taking relative to the UPSI window, and the availability of an innocent explanation for contact between the parties, this order confirms that SEBI expects investigators (and, by extension, your own internal surveillance) to benchmark a suspicious trade against the trader's own historical pattern, not just against the fact of a relationship to an insider. Practical takeaway: when your compliance function reviews trading by relatives of designated persons, build the same benchmarks into your own escalation criteria — does this trade depart materially from the relative's own trading history, and does the timing align with when the UPSI actually came into existence, not just with when it was later found to exist?

Bottom line for your compliance checklist

• Don't treat every heavy trade by a relative of a designated person around a results date as presumptively suspicious — SEBI's own evidentiary standard requires more than proximity, relationship, and bad timing.
• When assessing internal alerts, compare the trade against the individual's own historical trading pattern and check whether positions predate the actual UPSI formation date, not just the public announcement date.
• Remember that the December 2024 "relative" expansion (bringing in parents-in-law, among others) is not retrospective — historical trades before 6 December 2024 fall to be assessed under the pre-amendment definition.
• Be aware that SEBI can and does internally review AO exoneration orders under Section 15-I(3), but only intervenes where the AO's reasoning is legally unsustainable — a well-documented, evidence-based exoneration is durable, which is a useful data point when advising designated persons who are cleared after investigation.
• Keep records (trading history, rationale for trades, evidence of independent financial decision-making) that would let a family member of a designated person mount the same kind of defence that succeeded here, should the need ever arise.

This post is an interpretation of a publicly available SEBI order, prepared for general informational purposes only. It is not legal advice. Please verify details against SEBI's website and consult a qualified professional before acting on any of the points above.