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WHAT IS INSIDER TRADING?

Insider Trading

Insider trading, also known as insider dealing, is the malpractice of selling or buying securities such as equity and bonds by the insiders of a company, which includes the employees, directors, executives and promoters.

To prevent such acts and to promote fair trading in the market for the interest of common investors, the stock market regulator Sebi (the Securities and Exchange Board of India) has prohibited the firms to purchase their own shares from the secondary market.

Insider trading is one of the most serious malpractices that exists in the market.

Insider trading basically refers to the buying, selling or trading of shares or other securities (such as bonds or stock options) of a listed company using unpublished price-sensitive information (UPSI) that can affect the stock price that has not been disclosed yet.

Who is an insider?

The Sebi defines an ‘insider’ as someone who has access to price-sensitive information about a particular company's shares or securities. An insider can be anyone who has been associated with the company in some way during the six months preceding the insider trade.

That person could be an employee, a director, relative, banker or legal counsel to the company or even an official of the stock exchanges, trustees, employees or of an asset management company (AMC) that worked with the company.

Insiders, who have access to confidential and exclusive information about the issuer of a particular security or stock, benefit from buying or selling undisclosed securities before they fluctuate in price.

What is UPSI?

UPSI refers to a piece of exclusive information related to a firm’s stock prices, quarterly results, acquisition deals, mergers or any kind of sensitive activities that have not been shared with the public at large. When insiders are able to access the UPSI, they illegally conduct trade dealings for personal gains.

For example, a company director informs his friend about a yet-to-be-declared deal and the latter disseminates that information to his colleagues who then buy that company’s stocks. Then, the manager, his friend and his colleagues are liable to be booked by Sebi for violation of PTI (Prohibition of Insider Trading) Regulations.

In India, insider trades are regulated by the Sebi under the Insider Trading Regulations, 2015. In fact, the market regulator can impose fines and prohibit individuals or entities from trading in the capital market if found in violation of rules.

Penalty for insider trading

If any insider who -

either on his own or on behalf of any other person, deals in securities of a corporate listed on the stock exchange on the basis of any unpublished price-sensitive information; or
communicates any unpublished information to any person, with or without his permission for that particular information except as required in the ordinary course of business or under any law; or
procures for any other entity to deal in any securities of a corporate on the basis of unpublished price-sensitive information,

shall be liable to a penalty by the Sebi

Insider Trading Stories

Sebi bans 3 entities from securities market for insider trading activities
Sebi has slapped penalties totalling Rs 15 lakh on three entities and also barred them from the securities markets for one year ...| January 12, 2023, Thursday
Sebi amends buying, selling of mutual funds under insider trading rules
Capital markets regulator Sebi has amended norms to bring buying and selling of mutual fund units under the ambit of insider ...| November 25, 2022, Friday
Titan Case: Sebi levies Rs 2 lakh fine for violating insider trading norms
Capital markets regulator Sebi on Tuesday levied a fine of Rs 2 lakh on an individual for violating insider trading norms in the ...| November 22, 2022, Tuesday
Street Signs: Litmus test for IPO mkt, WhatsApp is Sebi's bogey, and more
This week, four companies are looking to raise more than Rs 4,100 crore via IPOs| October 31, 2022, Monday
Family feud: Kirloskar Brothers Ltd refutes charges of mis-utilising funds
Kirloskar Brothers Limited (KBL) on Sunday refuted allegations that it had spent Rs 274 crore towards payment of professional ...| October 16, 2022, Sunday
Kirloskar promoters get a breather in the insider trading case
The three-member SAT bench dismissed Sebi's argument that certain entities gained undue advantage of any UPSI| October 14, 2022, Friday
TMS Ep275:Credit Suisse, Natural Gas Price, NIFTY Earnings, Insider Trading
How big a threat is Credit Suisse to India and the world? How will high global natural gas prices affect India? Will banks and ...| October 06, 2022, Thursday
What is insider trading?
Sebi recently levied about Rs 6 lakh fine on three individuals for violating the insider trading norms in the shares of PVR Ltd. ...| October 06, 2022, Thursday
PVR case: Sebi penalises 3 individuals for violating insider trading norms
Capital markets regulator Sebi has imposed fines totalling Rs 6 lakh on three individuals for violating the insider trading norms ...| October 02, 2022, Sunday
Sebi penalises 19 persons for fraudulent trading in Global Infratech stock
Capital markets regulator Sebi has imposed a penalty of Rs 95 lakh on 19 individuals for indulging in manipulative trading in the ...| September 26, 2022, Monday

WHAT IS INSIDER TRADING?

Insider Trading

Who is an insider?

What is UPSI?

Penalty for insider trading

Insider Trading Stories

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