SEBI introduced regulations in 1992 to govern insider trading in India and prohibit the use of unpublished price sensitive information for securities trading. Insiders such as employees who have access to such information and connected persons such as family members cannot misuse this data for financial gain. Saira and her husband Sahil would be found guilty of insider trading as she shared non-public information about her company's acquisition plans with him, and he subsequently traded on this information for profit without following necessary pre-clearance procedures. SEBI regulations aim to promote fair securities markets and prevent information asymmetries through disclosure requirements and penalties for non-compliance, including heavy fines and imprisonment.

1. INSIDER TRADING

2. o History
o Legal Framework
o Meaning of Insider Trading
o Need of Insider Trading Regulation
o Meaning of Insiders
o Connected Persons
o Price Sensitive Information
o Prohibition of Trading

3. o Free Period
o Disclosures as per Securities And Exchange Board of India
(Prohibition of Insider Trading), 1992
o Penalties

4. o In 1979, the Sachar Committee recommended amendments to
the Companies Act,1956 to prohibit the insider trading.
o In 1986, the Patel Committee recommended that the Securities
Contracts Act, 1956 may be amended to curb insider trading and
unfair stock deals.
o In 1989, the Abid Hussain Committee recommended that the
insider trading activities may be penalised by civil and criminal
proceedings and also suggested the Securities And Exchange
Board of India (SEBI) to formulate the regulations and the
governing codes to prevent unfair dealings.
o In 1992, Securities And Exchange Board of India (prohibition of
Insider Trading) Regulations, came into force to prohibit insider
activities.

5. o SEBI introduced regulations to govern Insider Trading in 1992
o Regulations modified from time to time
o Applicable to all Listed Companies
o Applicable to all Registered Intermediaries
o Regulations require Company to adopt internal code of conduct

6. Sahil is her husband who
Saira is an Accounts
runs his own recruitment
Manager in XYZ Ltd
consultancy firm

7. One fine day when Saira was checking her emails she received a mail from Secretarial
Department. It contained an information that her Company is Going to buy over
some another Company (takeover of a Company).

8. Realising that the email was sent to her by mistake , Saira deleted it and
carried on with her day’s routine.

9. While taking dinner Saira discussed about the email she received with her
husband.

10. Sahil made a misuse of this unpublished price sensitive information and
made profit out of it by dealing in the securities of the Company.

11. Would Saira and Sahil be guilty of Insider Trading?

12. The answer is YES. Saira and Sahil will be punished as per the
Companies and SEBI’s Rules.
Reasons: 1. Dealing in unpublished price sensitive information
2. Opposite Transation
3 Pre-clearance not taken

13. As per SEBI the prohibition of Insider Trading is required to
make securities market:
oFair and Transparent
oTo have a level playing field for all the participants in market
oFree flow of information
oAvoid information asymmetry

14. An insider means any person who,
o is connected with the Company or is deemed to have been
connected with the Company and is reasonably expected to
have access to unpublished price sensitive information in
respect of securities of a Company, or
o has received or has had access to such unpublished price
sensitive information

15. As per Securities And Exchange Board of India (Prohibition of Insider
Trading), 1992 , connected persons are as below:
o Member of the Board of Directors of the Company Officer or an employee of
the Company
o Company under the same management or group or any subsidiary company
thereof
o Intermediaries like investment company, trustee company,asset management
Company, merchant Banker, share transfer Agent, Registrar to an issue,
broker, portfolio manager, Investment advisor, banker etc
o Official or an employee of a self regulatory Organisation
o An Official of a stock exchange or of clearing house corporation
o Relatives of all the above (as per section 6 of the Co. Act, 1956)

16. The following shall be deemed to be price sensitive information:
oPeriodical financial results of the Company
oIntended declaration of dividends (both interim and final)
oIntended issue of securities or buy-back of securities
oAny major expansion plans or execution of new projects
oAmalgamations, mergers or take-overs
oDisposal of the whole or substantially the whole of an undertaking

17. o Any changes in policies, plans of the Company
o Revision of credit ratings assigned to any debt or equity
instrument of the Company
o Litigation /dispute with a material impact
o Cancellation of dividend/rights/bonus, etc
o Any other information which materially affects the prices of
the securities of the Company

18. oProhibited Period Transactions
Connected Person (CP) not to deal during prohibited period (CP
shall be entitled to exercise the option under ESOP but cannot sale
during the Period
oOpposite Transaction
CP not to buy/sell during the next six months following the prior
transactions (except ESOPs)

19. o Any period other than the prohibited period is free period
o Share Dealing can be done in this period subject to pre-clearance
from the Compliance Officer

20. oInitial Disclosure (as per regulation 13(1) of the SEBI (Prohibition
of Insider Trading) Regulations, 1992
Any person who holds more than 5% shares or voting rights in
any Listed Company shall disclose to the Company in Form A
within 2 working days of acquiring the shares or voting rights
Any person who is a Director or Officer (including their
dependants) of a Listed Company should disclose to the
Company in Form B all its trade positions in equity or derivatives
within 2 days of appointment

21. o Continual Disclosure (as per regulation 13(1) of the SEBI
(Prohibition of Insider Trading) Regulations, 1992
Any person holding more than 5% shares or voting rights in any listed
Company shall disclose to the Company in Form C the number of shares
or voting rights held or any change exceeding 2% of total shareholding or
voting rights in the Company within 2 days of acquisition of shares
Any person who is a Director or Officer (including their dependants) of a
Listed Company should disclose to the Company in Form D, if change
exceeds Rs. 5 Lakhs in value or 25000 shares or 1% of total shareholding or
voting rights whichever is lower within 2 days of acquisition or sale of
shares

22. o Initiate Criminal Prosecution against the defaulter
o Prohibition from Dealing in any kind of Securities
o Restraining the defaulter from any counseling to any person to deal in
securities
o Null and voiding such transactions
o Penalty of Rs. 25 crore or 3 times the amount of profit made
whichever is
higher
o Imprisonment upto 10 years or fine upto 25 crores or both.

23. PRESENTED BY:
SHIKHA JAIN