ACaseofInsiderTrading

"Whenamanassumesapublictrustheshouldconsiderhimselfapublicproperty.ThomasJefferson

The insider trading cases reminds me a reminds about an incident which one of my trusted friend had
sharedwithme.Acolonizerboughtahugeagriculturelandatverycheappriceswhichwasingreenbelt
(zero construction area) in village Panchayat area. Two months later a fresh town planning scheme
public announcement done by local authorities to declare that area as yellow belt (residential use) and
corporationareaexpandedtobringthatlandwithincityplanningarea.Resultantly,causedthepricehike
ofpropertiesoftheareaupto100times!100timesprofitintwomonthstothatclevercolonizerandwas
the loss to those villagers who sold their precious land at cheaper prices due to lack of important
information.So,informationaboutchangewasthekeytodecidethewinnerinthegame.Whatyoucall
this?Colonizerhadpreviousinformationaboutpublicannouncements!Youmaybetrue.Thisiswhat
we call as Insider trading for stock market business. In this article, we will discuss the nature of
insidertrading.

Referring to recent controversy of worlds biggest scam of insider trading, Jurys verdict has come as
shockingnewstocorporateworld.Thisbussiness'Jzar'gotunfavorableorderofimprisonmentofJail20
years. It is really difficult to accept that a man who was achieved 15th rank in IIT entrance exams,
graduatedfromHowardUniversityandwhowasvirtuallyasynonymofsuccess,gotintolegaltrapof
insidertrading.Stillthereisdiverseopinionontheinnocenceofthisbusinessmagnetknowsacrossthe
globe.Somesaysheisguiltywhileothersdonotagreewiththis.However,heisfoundguiltyonthe
basisofchainofcircumstantialevidences.Mostofuswholooktowardhimasrealbusinessrolemodel,
canfeelthepainofthetragedyofarealgenius,'thebussinessJzar'.Thefirstroundoftrialisoverand
hemayproveinnocentinthehigherroundstillitgetfinalJudgmentfromSupremeCourt.Maygodhelp
togetjusticetoall.

Insidertradingisactuallyacivilandcriminaloffense.Itisdefinedastheuseofprivateinformationto
dotransactionsinshares.Itisaphenomenonwhereapersonhavingvaluableinformationaboutany
futuredealingofacompanyusessuchinformationtomaximizegaintohimselforanyotherentity.
Suchgainisconsideredasunjustifiedgainbecauseitviolatetheprincipleoflevelplayingfieldforother
shareholders.IndiatohasthelawforthisnamelySEBI(PreventionofInsiderTrading)RegulationAct,
1992. SEBI has set some examples where Insider trading cases were caught and SEBI filed civil and
criminalcasewell.TheoffendersaremostlyhighprofilepeopleininsidertradingcaselikeDirectors,top
notch employees and consultants. The definition of insider is wide and open to catch any connected
person.

Evidences for insider trading is usually indirect and circumstantial evidence. Since, the insider knows
thatheiscommittingsomethingwhichnotonlyillegalbutanimmoralactaswell,hence,hetakeall
possibleprecautions.Theinformationissuchavaluableandsensitivethingthatitcanbepassedinspur

ofsecondandpeoplemakesmillionstousethis.Thingshappensatlighteningspeed.Theinformationis
intangible.Itcanbepassedonmobile,SMS,papersliporeventhroughcodelanguage.Itisverydifficult
tofindrealdirectevidenceinsidertrading.So,investigationagenciesworkoncircumstantialevidences,
timingofcommunication,transactiontakenplace,pasthistoryofinvestmentandpatterns,pastrelations
amongconnectedperson,accruedbenefitstoinsidetraderetc.

Forexample,apersonofhighreputecomeoutofmeetingroomdiscussingsensitiveinvestmentdealand
makeaphonecalltohisfriendandthereafterhisfriendimmediatelymakesomehugeinvestmentsina
veryshorttimeandgainexceptionalprofitsovernight.Itraiseseyebrowsofinvestigationagenciestoput
responsible officials under scanning. This is what the circumstantial evidence. Indian evidence act
acceptsthecircumstantialevidence.

Marketmovesaretrulyunexpected.Eventhemostexperiencedplayersgetsurprises.Insidertradingis
bolttofreeflowoffairmarketspeculationsandveryunfairtotrueinvestors,analystandpeoplewho
trustoncompany.Itismoreofaquestionofmoralvaluesofanindividual.Theintegritycomesunder
scanning. I wonder how a single mistake the make life miserable and ruin a long standing corporate
career.

I like to conclude this article by an old saying Money is lost nothing is lost but prestige is lost,
everythinglost".ManagementcommunityknowtheverybasicfundamentalofbusinessethicsIswear
tomaintainconfidentialitybyallmeansandatanycost.Onewholivethisoathwillcertainlyfeelthe
worksatisfactionandselfpride.Valueshaveintrinsicvalueandextrinsicresults.Insidertradingcanbe
effectivelyrestrictedthroughvoiceofinnerself.

Regards
Ambrish

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