Understanding Insider Trading in India: Shortcomings and Recommendations

Knowledge is power. This is a saying that has been around for time immemorial and even to this day, it continues to hold true. You are bound to get a head start when you know more that your opponents. The philosophy of “by any means” is applicable in certain scenarios even today, but the reason why we have laws is to ensure equality and fair spirit of competition. Trading in securities of companies is one of the most lucrative fields today and it is one of the fields where getting access to information before the rest works in your favour as one piece of information can result in one yielding millions in profits. It is because of this that people go above and beyond to acquire what is referred to as UPSI or Unpublished Price Sensitive Information which in the simplest of terms refers to the type of information regarding the workings of a company or some sort of inside information which would give those who have access to it an unfair advantage over others and ensure profits to them or protect them from losses. This is, Insider Trading. Insider trading refers to the illegal practice of buying or selling securities of a publicly traded company based on unpublished price sensitive information. In India, insider trading is prohibited by the Securities and Exchange Board of India (SEBI) under the Prevention of Insider Trading Regulations, 2015. Now, although we have better legislations in present day and age to prevent Insider Trading to an extent but there exist various shortcomings in execution of the same. The paper aims to provide the reader an insight into the concept of Insider Trading and how it’s perceived in the Indian Context and then analyse the same and elucidate upon the shortcomings and present certain recommendations.