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Project

On
“Insider Trading & its Harmful Effects
- A Legal Perspective”

NATIONAL LAW INSTITUTE UNIVERSITY,


BHOPAL

Submitted by:
Yasha Shrivastava
BALLB (Hons.)- 15th Trimester
Roll No. 79

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Acknowledgement

It is indeed a great pleasure and a matter of immense satisfaction for me to express my deep
sense profound gratitude towards all the people who have helped and inspired me in this
project work.

First, I would like to give my gratitude to Prof. Padma Singh for the efforts by her right from
the selection of the project to its completion. She spent her precious time whenever I was in
need of guidance.

Moreover, I would like to thank NLIU for providing opportunities and sources for learning
and eventual completion of this project.

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Table of Contents

 Abstract.....................................................................................................................04

 Introduction...............................................................................................................05

 History of Insider Trading........................................................................................06

 Meaning of the term “Insider”............................................................................07-08

 Price Sensitive Information.....................................................................................08

 Harmful Effects of Insider Trading & Its working mechanisms..............................09

 Initiatives taken to prohibit Insider Trading in India...........................................09-10

 Rationale behind prohibiting Insider trading.......................................................11-13

 Insider trading regulations- An overview..................................................................13

 Comparison Between India, US and UK of Insider Trading Laws...........................14

 Landmark Cases...................................................................................................15-18

 Suggestion..................................................................................................................19

 Conclusion..................................................................................................................19

 References..................................................................................................................20

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 Abstract
As the business world continues to expand in global markets, trading of shares, bonds,
derivatives and other instruments continues to increase. One form of trading that has
received considerable interest in recent years is Insider Trading. It occurs when an
individual with potential access to non-public information about a Corporation buys or
sells stocks of that company. However if trading is done in a manner that does not take
advantage of non- public information, it is often permissible.

Insider Trading is an expression which has gained great currency in the financial markets
during the last two decades. Briefly it refers to a fraudulent practice which is resorted to
by most of the Corporate entities which are listed in a recognized stock exchange. Insider
trading is a global phenomenon which needs desperate attention and if unchecked it would
lead to several economic problems like increase in gap between the rich and the poor,
stock market collapses and economic down turns. It is regarded as a evil practice as rich
become richer and poor become poorer which is not good for any economy.

The project emphasizes on the harmful effects of Insider Trading and portrays the reason
as to why it is an offence punishable by law. It further talks about whether the present
legal system on Capital Markets is sufficient to deal with this problem or the law needs to
be strengthened further in this regard.

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 Introduction
Insider trading is one of the most violent crimes on the faith of fair dealing in a capital
market. The scope and stringency of the violation and penalties differ wildly from country
to country. As the name suggest “Insider Trading” is the trading done by an insider
(insiders may be executives, directors, or sometimes rank-and-file employees of the
company). There is no harm and crime involved in insider trading and it is completely legal
unless and until the trader is not cashing upon some confidential information which is not
available to the general public. If an insider uses some confidential information for his
own profit or leaks the information to his relative, friends or other firms so as to get
profited indirectly, it becomes illegal.

In simple terms, insider trading is the act of trading, directly or indirectly, in the securities
of a publicly listed company by any person, who may or may not be managing the affairs
of such company, based on certain information, not available to the public at large, that
can influence the market price of the securities of such company. An insider, who has
access to critical price sensitive information with respect to a given company, may tend to
use such information to his economic advantage, severely impairing the interests of a
public shareholder who is not privy to such information.

Although the precise explanation of Insider Trading is very difficult to define, the
following activities of an insider constitute insider trading:

 Taking advantage of inside information with full knowledge of the facts by dealing
for his own account or for the account of a third party, either directly or
indirectly, in transferable securities to which the inside information relates;

 Disclosing inside information to a third party unless such disclosure is made in the
normal course of the exercise of his employment, profession or duties.

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 History of Insider Trading
Insider trading or dealing is a practice which most countries have now recognized to be
objectionable. The first country to tackle it effectively was the United States of America.
The Securities Exchange Act of 1934 of the US imposes statutory curbs on insider trading,
requiring public disclosure of insiders' transactions in the shares of their companies and
providing for recovery of 'short swing' profits made by them. The Act provides remedial
measures for protection of investors against sharp practices and fraudulent schemes by
insiders in making short-term, speculative profits. A corporation or issuer of a registered
security can recover all profits realized by an insider, by unfair use of information which
he may have obtained by reason of his relationship to the issuer, from any purchase and
sale or vice versa of the security, within a period of 6 months. The quantum of
compensation to the injured shareholder is determined by the federal court.

Apart from the above legislative measure, in the USA, the Supreme Court and Courts of
Appeals of every State have issued guidelines on the subject to maintain proper 'fiduciary
standards', to ensure justice and equity with regard to insider trading and to protect the
interests of the investing public. The Securities and Exchange Commission has been
empowered under the Insider Trading Sanctions Act, 1984 of the US to seek imposition of
civil penalties, in addition to criminal proceedings, up to three times the profits gained or
losses avoided, in cases involving use of non-published price sensitive information or
material.

In the United Kingdom, in addition to the Company Securities (Insider Dealing) Act,
1985, the Companies Act, 1985 in its Part X (sections 323 to 329) contain provisions
regarding share dealings by directors and their families. Besides, there exists a non-
statutory model code relating to directors' share dealings, namely, 'the Stock Exchange
Model Code for Securities Transactions by Directors of Listed Companies'. This Code,
although non-statutory, is considered to be an effective restraint in relation to directors of
listed companies. This is not directly binding on directors but is a model which listed
companies are required to adopt.1

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“Securities laws and regulation of financial markets” by ICSI “Study of financial market” by
Roger.D.Agris“Swing Trading” by Jyoti Basu

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 Meaning of the term “Insider”
"Insiders" are persons connected with companies who are in a position to take advantage
of confidential, price-sensitive information before it becomes public and thereby make
speculative profits for themselves to the detriment of uninformed public investors. The
word "insider" has wide coverage. It includes directors, officers and employees of a
company and related companies, persons with professional or business relationship with a
company (e.g. auditors, solicitors, bankers and brokers), large beneficial shareholders,
government officials and Stock Exchange employees, etc. As a matter of course, directors
and employees have most (and direct) access to price-sensitive information and are
therefore most likely to deal or tip other persons to deal on the strength of such
information. However, this practice is not limited to directors but can be engaged in by
anyone who has access to such information. In this sense, an outsider may be held to be an
insider by virtue of his engaging himself in this practice on the strength of inside
information coming to his knowledge or obtained by him either directly by reason of his
being connected with the company, or indirectly from anyone who is connected with the
company.

The basis of insider trading is the buying or selling of securities while knowingly in
possession of some piece of confidential information which is not generally available and
which is likely, if made available to the general public, to materially affect the price of
these securities. So, for example, there is insider trading where a company director knows
that the company is in a bad financial state and sells his shares in it knowing that in a few
days time this news will be made public together with an announcement of a cut in
dividend payment. Likewise, the director would be insider dealing if, on being informed
before it was generally known by the public, that the company has discovered oil or gold
on its own land, he bought more shares in the company in the not unrealistic expectation
of an increase in their market value as a result of the subsequent public announcement.2

Thus, an insider who knows that the company is in a financial mess may sell his shares in
the company knowing that shortly there will be a public announcement of the news.
Similarly, a director of a company who is aware that the company has bagged a huge

2
“Securities laws and regulation of financial markets” by ICSI“Study of financial market” by
Roger.D.Agris“Swing Trading” by Jyoti Basu.

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export order may buy more shares of the company in anticipation of a rise in the price of
the company's shares.

The following persons will be treated as connected persons, i.e. persons connected with
the company:-

a) A director or shadow director of a company,

b) An officer or employee of a company,

c) A person having professional or business relationship with a company, if he may


reasonably be expected to have an access to unpublished price-sensitive information in
relation to that company.

Any person having any kind of professional or business relationship may become a
connected person and thereby an insider, if he may reasonably be expected to have an
access to unpublished price-sensitive information. The relationship and accessibility to
unpublished price-sensitive Information Facilitated By Such Relationship Is Necessary.

 Price sensitive Information


The Hindustan Level Limited v. Securities Exchange Board of India in 1998 was perhaps
the first under the regulation wherein SEBI’s findings on insider trading were set aside by
Securities Appellate Tribunal, which held that there was no trade involved, based on inside
information not being price sensitive as it was available to public domain.

Section 2(ha) of SEBI(Prohibition of Insider Trading) Regulation,1992 defines


‘Unpublished price sensitive information’ as any information which relates directly or
indirectly to a company and which if published is likely to materially affect the price of
securities of company”.

The prohibition contained in regulation 3 applies only when an insider trades or deals in
securities on the basis of any unpublished price sensitive information and not otherwise.
Although when an insider trades or deals in securities of a listed company, it may be
presumed that he traded on the basis of unpublished price sensitive information in his
procession, the contrary can be established for which burden of proving contrary to
presumption lies on the insider. Where the insider shows that he did not trade on the basis
of unpublished price sensitive information but on some other basis he cannot be said to have
violated the provision of regulation.

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Any information which is price sensitive should be announced quickly after it becomes
know to management of issue. Such sort of information should be kept confidential until
any public announcement is made by the issuer. If the degree of security cannot be
maintained an announcement to the public should be made.

 Harmful Effects of Insider Trading And Its Working Mechanism


Insider trading gives a negative impact for both, the investors and the country. It curbs the
fair quantum of demand and supply for the stocks and leads to an artificial increase in the
price of stocks, thereby inducing the innocent purchasers to purchase the stock at a very
high price than that of its original value.

Very soon after the purchase of these stocks, it plummets in the market resulting in huge
losses for the public investors, which in turn leads to a massive dip in the Sensex value
finally weakening the economy as a whole.

In the modernized era, wherein the Capital Markets all over the world is infested with the
disease of Insider Trading it is pertinent to know about the working mechanism of this
Doctrine. In this type of a transaction an Insider in a company buys the stock, and shares
the price sensitive information with a small group of people who buys the stock and spread
the word. As a result, an artificial demand is created for the particular stock and when the
prices of the stock hit the satisfactory level the insider exits the market along with his
small group of people by selling the stocks thereby making profits. Soon after selling, the
stocks plummet resulting in huge losses.

 Initiatives taken to prohibit Insider Trading in India


India was not late in recognizing the harm that insider trading can inflict upon the rights of
public shareholders, corporate governance in India and the financial markets. The first
concrete attempt to regulate Insider Trading was the constitution of the Thomas
Committee in the year 1948, which evaluated the global practices in restricting Insider
Trading inter-alia the Securities Exchange Act, 1934.

Pursuant to the recommendations of the Thomas Committee, Secs 307 &308 were
introduced in the Companies Act, 1956. This change paved the way for certain mandatory
disclosures by directors and managers, but was not very effective in achieving the
objective of preventing insider trading. Subsequently the Sachar Committee and the Patel

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Committee were constituted in the year 1978 and 1986 respectively, to recommend
measures for controlling insider trading in India.

The Abid Hussain Committee6 constituted in 1989 had recommended that a person of
guilty of insider trading should be penalized, both in the form of civil and criminal
proceedings. The main recommendations of this committee was to enact a separate statute
for prevention of Insider Trading.

Based on the recommendations made by this committee, a comprehensive legislation


known as SEBI (Insider Trading Regulations 1992) was promulgated and brought into
force. This regulation was substantially amended in the year 2002 to plug certain loop
holes which was revealed in the famous case of Hindustan Unilever Ltd VS SEBI and
Rakesh Agarwal VS SEBI and was re-named as SEBI( Prohibition of Insider Trading)
Regulations,1992. Ever since then, Insider Trading Regulations have been amended five
times and the last amendment was in the year 2015. As on date, SEBI the market watch
dog regulates Insider Trading through the SEBI Act and Insider Trading Regulations.

Further relying on the high standard of conduct stressed by the Cohen Committee with
respect to Insider Trading, SEBI had issued a press release on 19thAugust,1992 with a
recommendation to formulate the SEBI made an attempt to introduce the concept of
Short Swing Profits in the Insider Trading Regulations. SEBI sought to prohibit certain
category of Insiders from making short swing profits. It was inserted by way of an
amendment to Clause 4.2 in Schedule I of the Insider Trading Regulations.

 Rationale Behind Prohibiting Insider Trading

The ideal securities market is concerned with the allocation of capital in the economy.
This function is enabled by market efficiency, the situation where the market price of each
security accurately reflects the risk and return in its future. Thus the primary function of
regulation and policy is to foster market efficiency; hence we must evaluate the impact of
Insider Trading upon market efficiency. Insider Trading appears to be biased especially to
the speculators who invest in the market expecting there would be an appreciation in the
value of shares. It is a known fact that the smooth operation of the securities market and its
healthy growth and development depends to a great extent on the quality and integrity of
the players in the market. Such a market can alone inspire the confidence of the Investors.

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Insider Trading leads to loose of confidence of investors in securities market as they feel
that the market is rigged and only the few, who have inside information get benefit and
make profits from their investments. Thus the process of insider trading corrupts the level
playing field as public confidence in directors and others are closely associated with
companies, require that such people do not use inside information to further their own
interests. Consequently it can be deduced from the above that the rationale behind the
prohibition of insider trading is the obvious need and understandable concern about the
damage to public confidence which insider dealing is likely to cause and the clear
intention to prevent so far as possible what amounts to cheating when those with inside
knowledge use that knowledge to make a profit in their dealings with others

 Insider Trading Regulations – An Overview

India has put her efforts and has made a move towards the enactment of the new Insider
Trading Regulations with a view to align its laws on Insider Trading with that of the
developed countries. This would effectively help in combating Insider Trading to a very
large extent. SEBI in order to modify the law on Insider Trading and ensure that it is in
consonance with the global best practices, constituted a high level committee under the
Chairmanship of Justice N.K.Sodhi which drafted the Prohibition of Insider Trading
Regulations, 2015.

The new Insider Trading Regulations has brought about sweeping changes by amending
the definitions of various concepts. This Regulation comprises of Five Chapters, Two
Schedules and 12 Sections. Chapter I deals with the definitions. Chapter II deals with the
Restriction on Communications and Trading by Insiders. Chapter III talks about the
disclosures to be made by the companies while trading its securities by Insiders. Chapter
IV prescribes a Code of Fair Disclosure and Conduct. Chapter V contains provisions
dealing with the Powers and Sanctions.

The salient features of the Regulations are;

a) Under the new regulation the definition of Insider has been strengthened by expanding
the definition of Connected Person. According to the new regulations every connected
person is an Insider. It is a term of wide connotation and includes even public servants
who are reasonably expected to have access to UPSI are also considered to be Connected
Persons. Further it includes Immediate Relatives also.

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b) The new regulation has modified the definition of UPSI. It has been defined to mean
any information that is not generally available, which upon becoming generally available,
is likely to materially affect the price of the securities to which it relates and will
ordinarily include information relating to the following :

i) Financial results

ii) Dividends

iii) Change in Capital Structure.

iv) Mergers, Demergers, Acquisitions, Delistings, Disposals and expansion of business


and such other transactions.

v) Changes in key management personnel.

c) Trading Plans are novel concepts introduced under the New Regulations, wherein
Insiders who are liable to posses UPSI all round the year are permitted to formulate
trading plans with appropriate safeguards. It was introduced to facilitate compliant trading
by Insiders who are constantly in possession of UPSI. It has been introduced in line with
Rule 10b5-1 of the Securities Exchange Act, 1934.

d) The new regulations contain a code of fair disclosure and conduct. According to this
Code the Board of every listed company is required to formulate and publish a code of
practices and procedures to be followed for fair disclosure of UPSI in accordance with the
principles set out in Schedule A to the Regulations.

It sets out certain minimum standards such as equality of access to information’s,


publication of policies such as those on dividends, inorganic growth pursuits, calls and
meetings with analysts, publication of transcripts of such calls and meetings etc.

e) Another important development is in relation to notional trading windows which are


used as an instrument to monitor compliant trading by designated persons within the
company. The concept of notional trading windows has also been made applicable to
external agencies having contractual or fiduciary relationships with the company such as
law firms, accountancy firms etc. The time frame for such re-opening of trading windows
has been set to 48 hours after the UPSI becomes generally available.

f) The key feature of this regulation is that it contains a specific carve out for
communicating and procurement of information, for instance for the purpose of

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conducting due diligence in connection with potential transactions including mergers and
acquisitions. It states that as long as the Board is of the opinion that the transaction is in
the best interest of the company due diligence may be conducted.

 Exceptions to Insider Trading


The distinction between legally permitted share trading by insiders and what is illegal
needs to be carefully understood. The presumption that an insider who is involved in the
management or affairs of a public company would have access to privileged information is
but natural. However they cannot absolutely preclude insiders from acquiring or alienating
any securities. Such a blanket provision would not be reasonable, and would be in
violation of the legal rights of the insiders and would defy the logic of freely tradeable
securities. More importantly such a provision may not even be practically viable as it
would be irrational to stop promoters of a company from dealing in their securities. This is
exactly where a distinction is required to be drawn between what is permitted and what is
not permitted.

The restriction is on corporate insiders directly or indirectly using the price sensitive
information that they hold to the exclusion of the other shareholders in arriving at trading
decisions. There is absolutely no restriction on insiders in trading in securities of the
company if they do not hold any price sensitive information that the public is not already
aware of. Upon the price sensitive information being disclosed to the market, the share
prices would surge if the price sensitive information is perceived to be positive and the
same would plummet if perceived to be negative. During that short while, insiders
receiving the price sensitive information and the public disclosure of that information,
insiders attempt to deal in securities such that they can take advantage of the market
reaction, that is about to follow.

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 Comparison Between India, US and UK of Insider Trading Laws

Sl.No. Issue United States United Kingdom India


Securities Act of
1933 and Financial Services Securities and
Governing
1. Securities and Markets Exchange Board of
Laws
Exchange Act of Act,2000 India Act, 1992
1934
It is both a Civil It is only an Economic
It is both a Civil and a
2. Sanctions and a Criminal Offence and not a
Criminal Offence.
Offence Criminal Offence.
Number of
3. Two Acts. One Act. One Act.
Acts
Securities Securities and
Regulatory Financial Services
4. Exchange Exchange Board of
Authority Authority.
Commission. India.
20 Years in Fine upto 25 crores or
Seven Years
Prison and afine three times the profit
5. Punishment Imprisonment and
of 5 million US made out of Insider
unlimited fine.
Dollars. Trading.

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 Land Mark Cases
1. Dilip Pendse VS SEBI3
Nishkalpa was a wholly owned subsidiary of Tata Finance Ltd (TFL), which was a
listed company. Pendse was the Managing Director of TFL. On 31st March 2001
Nishkalpa had incurred a huge loss of Rs. 79.37 crores and this was bound to affect
the profits of Tata Finance Limited. This was basically an Unpublished Price Sensitive
Information (UPSI) which Pendse was aware. This information was disclosed to the
public only on 30th April 2001. Thus any transaction by an Insider within the period
of 31/03/2001 and 30/04/2001 was bound to fall within the scope of Insider Trading.
Dilip Pendse passed on this information to his wife who sold 2,90,000 shares of TFL
held in her own name as well as in the name of the companies controlled by her and
her father-in-law. SEBI leveled charges against Dilip Pendse for Insider Trading.

However SAT in its recent ruling turned down the charges of Insider Trading as
against Pendse on account of failure to adhere to the fundamental principle of
permitting cross examination of a person on whose statements such charges were
established and it lacked the necessary evidence.

This case testifies the fact that SEBI lacks a thorough investigative mechanism and a
vigilant approach due to which culprits are able to escape from the clutches of law. In
most of the cases, SEBI failed to adduce evidence and corroborate its stance before the
Court. Unlike the balance of probabilities that is required in proving a civil liability, a
case involving criminal liability requires the allegations to be proved beyond
reasonable doubts. Therefore there should be thread bare investigation and all
loopholes if any should be properly plugged in.

3.(2009) 84 CC 454

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2. FCGL Case4
FCGL Industries Limited, a core investment company with over 90% of its assets
being investments in associated or group companies, decided to acquire certain mines
in Australia, for which it required funding. The board of FCGL decided to liquidate its
investment in Gujarat NRE Coke Limited constituting 17.716% of its capital in order
to fund FCGL’s acquisition of Australian mines. While both the mine acquisition
transaction and share divestment transaction were approved by FCGL at the same
board meeting, its press release only specified the mine acquisition without making
public the divestment of shares in Gujarat NRE Coke. The adjudicating officer of
SEBI found FCGL guilty of violating insider trading norms due to non-disclosure of
the divestment of shares as they were found to constitute unpublished price sensitive
information. Accordingly, SEBI imposed penalties on the company and its key
directors.

Question of Law:
The key question that came up for consideration was: Whether FCGL’s sale of shares
in Gujarat NRE Coke amounts to price sensitive information.

Judgement:
SAT on appeal reversed the order of SEBI stating that the divestment of shares was
not price sensitive information. The reason behind passing such a judgement was that:

Regulation 3 of the Insider Trading Regulations would stand violated only if the
unpublished information was price sensitive in nature. A reading of the definition of
Price Sensitive Information would make it clear that the information which relates to
a company and which when published is likely to materially affect the prices of its
securities, would amount to a price sensitive information.

In this case FCGL is an investment company whose business is only to make


investments in the securities of other companies. It earns income by buying and
selling securities held by it as investments. This being the normal activity of an
investment company, every decision by it to buy or sell its investments would have
no effect, much less material, on the price of its own securities. If that were so then no

2. SAT Decision dated Nov. 18 2011

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investment company would be able to function because every time it would buy or
sell securities held by it as investments, it would have to make disclosures to the stock
exchanges where its securities are listed. Such decisions of an Investment Company in
our opinion do not affect the price of its securities.

SAT’s order seem to suggest that any transaction carried out by a company in its
ordinary course of business will not elevate itself to something that requires
disclosure to the market as price sensitive information. In the investment context, the
reasoning would apply to entities such as broking companies or market makers that
are in the business of buying and selling securities on a regular basis.

However SAT seems to provide the same treatment even for investment holding
companies, although the investment and divestment activity may only be intermittent
in nature in such companies.

3. Rakesh Aggarwal VS SEBI5


Rakesh Aggarwal was the Managing Director of ABS Industries Ltd (ABS) and was
involved in negotiations with Bayer A.G ( a company incorporated in Germany)
regarding their intentions to take over ABS. Being the Managing Director with such
high portfolio it goes without saying that he has access to price sensitive information.
He wanted to circumvent the provisions of law through tactful manner. Before the
announcement of merger is made public through announcement, he made a collusive
agreement with his brother to take over the shares of ABS from the market. Thereafter
he tendered the same shares through the open offer making a huge profit. These
clandestine agreements could be traced by SEBI through their tread bare investigation.
Bayer AG subsequently acquired ABS Further he was also an Insider as far as ABS is
concerned.

The secretive agreement entered into between Rakesh Aggarwal and his brother to
acquire the shares before the merger was carried out in violation of Regulation 4 of
the SEBI Regulations. He vehemently denied the allegations levelled against him by
SEBI stating that he has acted in such a manner for the benefits of the company and
he has n o intentions to have personal gains. He said that he wanted to acquire 51%

5
(2004) 1 COMP LJ 193 SAT

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of the shares of ABS through Bayer and he wanted the plan to be executed in clinical
precision. The SEBI directed him to deposit RS.34,00,000 with the Investor
Education and Protection Funds of both the stock exchanges viz the BSE and NSE in
equal proportions to compensate any investor who may make claim subsequently. A
case was made against him under Section 24 of SEBI Act.

However he made an appeal to the Securities Appellate Tribunal. The Securities


Appellate Tribunal held that SEBI’s order directing him to pay Rs.34,00,000 to the
Investor Education and Protection Fund could not be sustained, because he did it in
the interest of the company.

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 Suggestions
The filters available under the present legal system governing the Capital Markets in India
are inadequate. It can be improved by incorporating the following suggestions . They are:

1. Insider Trading in India must be made as an offence under the Indian Penal Code
(I.P.C) as that of the UK legal system. In UK both Civil and Criminal Sanctions are
available for the offence of Insider Trading.
2. Secondly it must be made as a non-bailable offence in the Criminal Procedure Code
as this would serve as a deterrent and prevent people who are employed in the
Corporate Sector from resorting to such fraudulent activities.
3. SEBI must make it mandatory for all stock exchanges to establish a separate unit
called the Market Abuse Unit as it is in the US to investigate highly sophisticated
Capital Market Frauds like Insider Trading, Market Manipulation, Front Running,
Collusive Trading and Abusive Short Selling.
4. SEBI must conduct programs to establish awareness among the innocent investors
about such deceptive practices and how to protect themselves against such harmful
activities.
5. The major lacunae with our market regulator are that it does not levy appropriate
penalties in consonance with the law. It levies a lesser amount as fine.
6. The Consent Settlement Mechanism pertaining to Insider Trading must be abolished.

 Conclusion
The prohibition of Insider Trading Regulations, 2015 by the market regulator SEBI is
a welcome development appreciated by the general public as it provides a stringent
set of regulations with a view to curb Insider Trading and is in consonance with the
International practices. This new regulation ensures a fair level playing field in the
securities market and to safeguard the interest of the investors, and this move by SEBI
will facilitate further economic buoyancy in the Indian Capital Market.

Further it introduces a plethora of new concepts that aim at plugging the loopholes
which were prevalent in the previous regulations. In my opinion I would like to state
that this regulation is a comprehensive regulation as it addresses the present day needs
and trends in the Capital Markets, and would hold good at least for the next five years

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(half a decade). The present regulation has got its heart in the right place and it has
started on the right path in attaining its objective.

 References

1. http://lawquestinternational.com/insider-trading-%E2%80%93-definition-and-
ramifications

2. http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Insi
der_Trading_Regulations_-_A_Primer.pdf

3. http://www.ialm.academy/insider-trading-and-its-harmful-effects-a-legal-
perspective/

4. http://www.sebi.gov.in/cms/sebi_data/attachdocs/1421319519608.pdf

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