<\/p>\n
REGULATIONS AND PROVISIONS TO CURB INSIDER TRADING<\/h1>\n
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- The regulations of \u2018SEBI (prohibition of Insider Trading) Regulation<\/em> 2015\u2019 prescribes the rules which penalizes and restricts the Insider Trading in India. And are mainly applicable on dealing with Listed Securities which involves \u201cbuying, selling or agreeing to buy, sell or deal in any securities by any person either as principal or agent, by insiders on the basis of any private confidential information.\u201d<\/li>\n
- These Regulations prohibits the \u201ccommunication of any confidential information, by an insider.\u201d Given, Communication of such information has to unauthorized.<\/li>\n<\/ul>\n
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\nIn case of contravention of the provisions of SEBI Regulations, it will amount to an offence under the \u2018SEBI Act,1992\u2019<\/em>( Section 15G<\/em>) and \u2018Companies Act, 2013\u2019 (Section 458) <\/em>and is punishable with imprisonment up to 10years or be fined up to 25 crores.<\/p>\n- <\/br><\/p>\n
- SEBI has the power to investigate the cases of alleged \u2018Insider Trading\u2019.<\/li>\n<\/ul>\n
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\n <\/p>\nLEADING CASE LAWS<\/p>\n
In the case of\u00a0Hindustan Lever limited (HIL) Vs SEBI[1]<\/strong><\/a>,<\/em> SEBI made an amendment to the regulations and added and defined the word \u2018unpublished\u2019. This was the origin for the definition of the term \u2018Unpublished Price Sensitive Information in India\u2019.<\/br><\/p>\n
In the case of Rakesh Agrawal vs. SEBI<\/em>[2]<\/a> SEBI accused Mr. Rakesh Agarwal to be guilty of insider trading since he sold his shares of ABS Industries via his brother in law who happened to be an well connected individual on annoncement of acquisition of the commpany. SEBI directed him to deposit 34 Lakhs to pay the investors who are going\u00a0 to claim later. On Appeal to the Security Appeallate Tribunal, it was found that\u00a0 the accused traded the shares in best interest of the compay and not with malicious intent. \u00a0The tribunal held that: \u201cTaking into consideration the very objective of the SEBI Regulations prohibiting the insider trading, the intention\/motive of the insider has to be taken cognizance of. It is true that the regulation does not specifically bring in mens rea as an ingredient of insider trading. But that does not mean that the motive need be ignored.\u201d<\/em><\/br><\/p>\n
Disclosure is only permitted if it is for legitimate purposes, performance of duties or discharge of legal obligations. In Dirks v. SEC[3]<\/strong><\/em><\/a>, a case from US, it was held that \u201cpersons like lawyers, accountants, etc. who are actually outsiders will be construed as insiders from the point at which the UPSI was shared with them under ordinary course of business<\/em>.<\/br><\/p>\n
[1]<\/a> \u00a0Hindustan Lever limited (HIL) Vs SEBI,\u00a0(1998) 18 SCL 311 MOF.<\/p>\n
[2]<\/a> Rakesh Agrawal vs. SEBI ,2004 49 SCL 351 SAT.<\/p>\n
[3]<\/a> \u00a0Dirks v. SEC ,463 U.S. 646 (1983).<\/p>\n
CONCLUSION<\/u><\/br><\/p>\n
It is imperative to mention that the very instance of insider trading violates the fair trade policy and causes damages to the innocent investors. Law should be made more stringent to curb such white collar crimes, so as to maintain the integrity of the market.<\/a><\/br><\/p>\n
- These Regulations prohibits the \u201ccommunication of any confidential information, by an insider.\u201d Given, Communication of such information has to unauthorized.<\/li>\n<\/ul>\n
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