• Insider Trading

    The Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2008, defines an “insider” as any person who

    (i) is or was connected with the company or is deemed to have been connected with the company and who is reasonably expected to have access to unpublished price-sensitive information in respect of securities of a company, or

    (ii) has received or has had access to such unpublished price sensitive information”

    Securities and Exchange Board of India (Sebi) rules forbid insider trading in the shares of a company only during the “Quiet Period”, which is seven days before the announcement of price-sensitive information. But the actual “Quiet Period” may be decided by the company.

    Benefits of stopping insider trading

    • It stops insider to do the trading on the company’s share during the quiet period.
    • The insiders know the financial information and performance of the company before being released in the market. If they trade on the same or pass the information to some other trader, it will violate the efficiency rule of the capital market trading and will encourage unethical trading.
    • The insider with prior information gets an added advantage and unethical opportunity to make money in the market.

    To stop the unethical trading and protect the non-public information trading on insider information is banned in the capital market.

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