Recently, Amazon accused the future of insider trading and asked SEBI to probe it
What is insider trading?
- It is a trading of a public company’s stock or other securities (such as bonds or stock options) based on material, nonpublic information about the company.
- It is defined as a malpractice wherein trade of a company’s securities is undertaken by people who by virtue of their work have access(key employees or executives who have access to the strategic information about the company) to the otherwise non public information which can be crucial for making investment decisions.
- This can be either illegal or legal depending on when the insider makes the trade
- In other words, Insider trading is illegal when the material information is still non-public, and this sort of insider trading comes with harsh consequences.
- Insider trading is highly discouraged by the Securities and Exchange Board of India to promote fair trading in the market for the benefit of the common investor.
- However, in certain cases, if the information has been made public, in a way that all concerned investors have access to it, that will not be a case of illegal insider trading.
- In India it is regulated by SEBI, Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2020 were passed in this regard