This document discusses insider trading and the case of Hindustan Unilever Limited vs SEBI. It provides details of the legal controversy where SEBI charged HUL with insider trading for purchasing shares in Brooke Bond Lipton India Ltd. two weeks before announcing their merger. SEBI directed HUL to pay compensation to UTI and initiated criminal proceedings against common directors, though HUL appealed and the appellate authority ruled in its favor. The document also covers advantages and disadvantages of insider trading, and the need to regulate it to maintain trust and prevent market manipulation.

1. INSIDER TRADING
BY :- HEMITA DUA

2. INSIDER TRADING
 Insider trading is the trading of a public
company's stock or other securities (such
as bonds or stock options) by individuals with
access to non-public information about the
company.
 It is illegal
 Unfair to other investors who do not have access
to the information.

3. HINDUSTAN UNILEVER LIMITED
V/S SEBI
Case Details:
Case Code : FINC014
Case Length : 8 Pages
Period : 1995 - 1998
Pub. Date : 2002
Teaching
Note
: Available
Organization : HLL, BBLIL, SEBI, UTI
Industry : Diversified
Countries : India

4. HINDUSTAN UNILEVER LIMITED
V/S SEBI
 Insider trading charges against HLL with regard to
its merger with Brooke Bond Lipton India Ltd.
 legal controversy surrounding these charges.

5. HLL V/S SEBI
 HLL's purchase of 8 lakh shares of BBLIL two
weeks prior to the public announcement of the
merger of the two companies (HLL and BBLIL).
 SEBI, suspecting insider trading, conducted
enquiries,
 SEBI issued a show cause notice to the
Chairman, all Executive Directors, the Company
Secretary and the then Chairman of HLL.
 SEBI passed an order charging HLL with insider
trading.

6. HLL V/S SEBI
 SEBI directed HLL to pay UTI compensation, and
also initiated criminal proceedings against the
five common directors of HLL and BBLIL.
 HLL filed an appeal with the appellate authority,
which ruled in its favour.

7. ADVANTAGES OF INSIDER TRADING
 Mass security transaction could well be done by
big institutional traders without impacting price
movements.
 Tiny investors to benefit immensely from this sort
of trading activities yet this has been an issue of
huge debate.
 Benefits the institutional buyers to purchase
securities at a fixed floor price or even sell the
same as the fixed price on that date rather than get
stuck in the unpredictability of the market.

8. DISADVANTAGES OF INSIDER
TRADING
 Stockbrokers, informers and frauds manipulate the
security markets by leaking information.
 Spread out rumour about a insider transaction.
 Enhance the risk for stock market crash.
 Leads to a decrease in the overall trust in the
market.

9. NEED TO PREVENT INSIDER TRADING

10. STEPS TO CUT DOWN ON INSIDER
TRADING
 Companies need to keep a close eye on external parties
such as advisers and consultants.
 Having an internal watchdog is a good idea.
 Time to carefully review analysts’ reports for possible
information leaks.
 Third-party verification
 Corporate code prohibiting insider trading
 Phone tapping & surveillance
 Punishment

11. WHY IS IT NECESSARY TO REGULATE INSIDER
TRADING ?
 It is still a debated concern whether or not such trading
activities needs to be banned or permitted to stay.
 One school of thoughts suggests that such transactions
results in the unambiguous price stability
mechanism and equilibrium in the market.
 They believe that eventually it is a game where you
can find no gainers or losers.
 It is very likely that with the correct monitoring
system in place the Insider Trading could make the
security market the best place to invest money.