Business Standard
What is insider trading?

Insider Trading

About Insider Trading

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buying, selling or trading of shares or other securities (such as bonds or stock options) of a listed company using unpublished price-sensitive information (UPSI) that can affect the stock price that has not been disclosed yet.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

Latest Updates on Insider Trading

Billionaire Joe Lewis gets no prison time at sentencing for insider trading

4 min read Last Updated :Apr 05 2024 | 9:56 AM IST
PwC India to offer tech-based compliance monitoring services with Axar

2 min read Last Updated :Mar 15 2024 | 7:22 PM IST
Sebi fines NCP chief's nephew Abhijit Pawar Rs 10 lakh for insider trading

3 min read Last Updated :Jan 17 2024 | 10:51 AM IST
SAT quashes Sebi's order against Biyani, others in insider trading case

3 min read Last Updated :Dec 20 2023 | 5:57 PM IST
Sebi levies Rs 65 lakh fine on 5 individuals for insider trading violation

2 min read Last Updated :Sep 18 2023 | 11:07 PM IST
Individual settles alleged insider trading case with Sebi, pays Rs 26 lakh

1 min read Last Updated :Aug 23 2023 | 10:56 PM IST
Tottenham owner Lewis surrenders to face charges in insider trading case

1 min read Last Updated :Jul 27 2023 | 12:13 AM IST
US: 2 Indian-origin men charged with insider trading with Pfizer Covid meds

3 min read Last Updated :Jul 01 2023 | 10:05 PM IST
Sebi revokes securities market ban on 6 entities in Poonawalla Fincorp case

2 min read Last Updated :Jun 22 2023 | 10:03 PM IST
Four entities settle insider trading case in Poonawalla Fincorp with Sebi

3 min read Last Updated :May 17 2023 | 11:42 PM IST
ZEEL CEO Goenka settles insider trading case with Sebi; pays Rs 50.7 lakh

2 min read Last Updated :Apr 13 2023 | 8:30 PM IST
Wockhardt's former official settles insider trading case with Sebi

2 min read Last Updated :Mar 02 2023 | 11:00 PM IST
Sebi bans 2 individuals from securities markets, fines for insider trading

3 min read Last Updated :Mar 01 2023 | 8:05 PM IST
Sebi bans 3 entities from securities market for insider trading activities

2 min read Last Updated :Jan 12 2023 | 7:36 PM IST
Sebi amends buying, selling of mutual funds under insider trading rules

3 min read Last Updated :Nov 25 2022 | 2:36 PM IST
Titan Case: Sebi levies Rs 2 lakh fine for violating insider trading norms

2 min read Last Updated :Nov 22 2022 | 10:12 PM IST
Street Signs: Litmus test for IPO mkt, WhatsApp is Sebi's bogey, and more

2 min read Last Updated :Oct 31 2022 | 6:15 AM IST
Family feud: Kirloskar Brothers Ltd refutes charges of mis-utilising funds

3 min read Last Updated :Oct 16 2022 | 11:06 PM IST
Kirloskar promoters get a breather in the insider trading case

2 min read Last Updated :Oct 14 2022 | 10:06 PM IST
Volume IconTMS Ep275:Credit Suisse, Natural Gas Price, NIFTY Earnings, Insider Trading

2 min read Last Updated :Oct 06 2022 | 10:10 AM IST