Categories: Stocks

Insider Trading

Insider trading refers to trading carried out by key employees or other company insiders who have access to exclusive information that can impact the prices of securities. If such insiders act upon this information, it is known as insider trading and is illegal. The Indian regulator, SEBI, has stringent regulations regarding such practices and there are serious penalties applicable in case of violations.

Is all Insider trading illegal?

Since employees may own stocks in such companies, not all trading activity can be classified as Insider trading. They may trade or deal in such stocks, after retirement or without any access to inside information or when regulatory provisions are no longer applicable or the quantity does not meet the compliance criteria.

What are SEBI regulations on Insider trading?

To ensure investor protection, SEBI has certain regulations in place for insider trading :
a) providing equal opportunities to market participants
b) ensuring fairness and transparency in all market transactions
c) ensuring proper and open flow of information and preventing unusual advantage to a specific party

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