Key points to know about Insider trading in India
Insider trading is illegal in India and there are strict regulations in place to prevent and penalize such activities. The Securities and Exchange Board of India (SEBI) is the regulatory body responsible for enforcing these regulations.
Here are the key points to know about insider trading in India:
What is considered insider trading?
- Buying or selling securities based on material non-public information (MNPI).
- Passing on MNPI to others who then use it to trade.
- Tipping off others about MNPI.
What is MNPI?
- Information that is not publicly known and would be likely to have a significant impact on the price of a security.
- Examples include mergers and acquisitions, earnings reports, and major product announcements.
What are the penalties for insider trading?
- Civil penalties: SEBI can impose fines of up to 10 times the profit made or loss avoided.
- Disgorgement: Insider traders may be forced to give up their profits.
- Criminal penalties: In serious cases, individuals can be imprisoned for up to 10 years.
What are the regulations that govern insider trading?
- The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015
- The SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations,2003
- SEBI (Prohibition of Insider Trading) Regulations, 2015: https://www.sebi.gov.in/legal/regulations/nov-2022/securities-and-exchange-board-of-india-prohibition-of-insider-trading-regulations-2015-last-amended-on-november-24-2022_65864.html
- SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003:https://www.sebi.gov.in/legal/regulations/jan-2022/securities-and-exchange-board-of-india-prohibition-of-fraudulent-and-unfair-trade-practices-relating-to-securities-market-regulations-2003-last-amended-on-january-25-2022-_55604.html
- The burden of proof in insider trading cases is on SEBI.
- SEBI can also issue disgorgement orders against companies that benefit from insider trading.
- SEBI has been increasingly active in enforcing insider trading regulations in recent years.
Please note that this is not a substitute for legal advice. If you have any questions about insider trading laws in India, you should consult with a lawyer.