Md. Aadil Naushad, Christ University, Bangalore
ABSTRACT
To maintain a fair and equitable functioning of the securities market, proper regulation is required although malpractices such as insider trading disrupt the ethos of trading with integrity. Various scams and frauds throughout the country has put the regulatory framework in disarray many a times exposing the lacunas in the laws. To tackle such activities which lead to investors losing interest and confidence in the securities market, the Securities Exchange Board of India (SEBI) has come up with various rules and regulations to curb such malpractices. This paper seeks to make its readers informed about the concept of insider trading and how it affects the markets negatively, in doing so the author will make use of case studies along with the legal stance on the particular issue. To maintain the integrity of the securities market it is very important insider trading is penalised and stringent laws are in place to punish the players indulging in such activities as insider trading dismantles the balance in the markets and gives an undue advantage to the persons practising insider trading. The SEBI has through its various regulations defined insider trading and how it takes place and has provided various punishments to curb insider trading. The SEBI introduced the SEBI (Prohibition of Insider Trading) Regulations, 1992 (“1992 regulations”), which have now been repealed, and the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“2015 regulations”) have come into force to counter the shortcomings of the previous regulations and to curb the menace of insider trading, which is an illegal method used by some vested interests in the field of corporate businesses to fulfil their own monetary expectations by providing information (Unpublished price sensitive information) which are confidential and capable of causing considerable change to the value of shares. Insider trading basically involves buying and selling of shares based upon important and confidential information which is not generally available to the public but is disclosed through some insider with a mala-fide aim to gain profits illegally. This article will provide a thorough overview about the issue.
Keywords: Insider Trading, Securities Exchange Board of India (SEBI), Stock Exchange, Scam, SEBI (Prohibition of Insider Trading) Regulations, 1992, SEBI (Prohibition of Insider Trading) Regulations, 2015 (“2015 regulation
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