Insider Trading Laws in India: Analysing SEBI’s Enforcement Mechanisms and Their Deterrent Effect
- NLR Journal
- Apr 10
- 1 min read
By Diya Sharma, 5th year Law Student, Manav Rachna University, Faridabad.
Abstract
This paper delves into insider trading and its effect on the integrity of the market and investor’s confidence. Insider trading can be defined as a situation when an individual trades in securities on the basis of undisclosed information not yet disseminated to the public. This undisclosed information can affect share price. The paper makes a case for stricter laws in relation to preventing insiders in the market using undisclosed information to their benefit, unfairly impacting the way the market operates. Insider trading laws rely on knowledge of undisclosed price sensitive information (UPSI) such as financial performance, merger and acquisition activity, or regulatory action. Insider trading laws are required to facilitate parity and provide a fair chance for everyone, eliminate cheating, and provide investor confidence.
The paper deals with how SEBI acts as a regulatory body and enforces insider trading laws, as well as how the regulatory body oversees for violations and punishes offenders. Various influential committee reports have informed legislation in India, as well as the formulation of the SEBI and the passing of the 1992 Regulations. This document covers two key developments that were legislated as a result of the 2015 and 2019 amendments, which increased the universe of insiders, updating the compliance obligations to meet and adhere to the law, and enhanced supervisory practices to monitor practices.
In conclusion, this article advocates for continuous reforms in surveillance, transparency, and corporate governance to combat insider trading effectively. Strengthening regulatory mechanisms, leveraging technological advancements, and increasing awareness will contribute to a fair, transparent, and trustworthy securities market in India.
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