The SEBI (Prohibition of Insider Trading) Regulations, 2015, aim to prevent unfair trading practices by prohibiting individuals with access to unpublished price-sensitive information (UPSI) from using it for personal gain.

Insider trading involves trading in a company’s securities while possessing UPSI which is not generally available to the public and could materially affect the price of the securities. These laws aim to ensure fairness and transparency, maintaining an even playing field for all investors.

An insider is not just a corporate executive. Anyone with access to unpublished price sensitive information can be classified as an insider, such as:

• Company executives
• Board members
• Employees
• Key managerial persons
• Family members or friends of insiders who might receive tips about material non-public information.

 

Violation of PIT Regulations, 2015 committed renders liability for the imposition of penalty under Section 15G read with Section 11B(2) of the SEBI Act, 1992, which provide as under:

either on his own behalf or on behalf of any other person, deals in securities of a body corporate listed on any stock exchange on the basis of any unpublished price sensitive information; or communicates any unpublished price-sensitive information to any person, with or without his request for such information except as required in the ordinary course of business or under any law, or counsels, or procures for any other person to deal in any securities of any body corporate on the basis of unpublished price- sensitive information, shall be liable to a penalty which shall not be less than ten lakh rupees but which may extend to twenty -five crore rupees or three times the amount of  profits made  out  of insider trading, whichever is higher.

CONCLUSION

In conclusion, the prohibition of insider trading is essential for maintaining fairness, transparency, and trust in financial markets. By preventing individuals with access to non-public, material information from using it for personal gain, these regulations promote a level playing field for all investors. Upholding these laws helps ensure market integrity, reduces the risk of manipulation, and fosters investor confidence in the financial system.