In news- Recently, SEBI imposed Rs.3 lakh fine on Shilpa Shetty, her husband and businessman Raj Kundra and his firm Viaan Industries for flouting its regulations on insider trading.
What is Insider trading?
- Insider trading refers to trading of shares by an ‘insider’ based on unpublished price sensitive information (UPSI).
- It involves buying or selling shares of a listed company using information that can materially impact the stock price, but has not been made public yet.
- SEBI regulations define an ‘insider’ as someone who is a connected person or has access to UPSI.
- A connected person can be anyone who during the six months preceding the insider trade has been associated with the company in some way.
- This could be a company director or employee or their close relatives, or a legal counsel or banker to the company or even an official of the stock exchanges or trustees or employees of an asset management company who interacted with the company.
- In India, Section 11(2)(g) of Securities and Exchange Board of India Act, 1992 provides power to prohibit insider trading in securities in India.
- Regulation 3(1) of the SEBI (Prohibition of Insider Trading) Regulations, 2015 lays down the first prohibition on insider trading and states that no insider shall communicate any UPSI relating to a company to any person.
- SEBI can impose fines and debar individuals/entities from trading in the market if found in violation of the rules.