Nailing the Insider: A Hard-Won Fray

Richa Chauhan

Rajiv Gandhi National University of Law, Patiala, India

Volume III, Issue IV, 2020

The revelation of high profile frauds and scams in Indian and International Capital markets has drawn the attention of the regulators of these markets towards the necessity of setting up the corporate governance standards along with the sanctions in case of violation of the regulations or guidelines prescribed by the regulators and legislatures. Despite of having abundant legal machinery, the laymen investing their money in the market to get economic stability are suffering in the hands of big corporate mafias. The Corporate crimes in the face of cheating, misappropriation, fraudulent practices and insider trading practices victimizes the small investors and has shaken up the confidence of public in probity of the capital market. For attaining greater heights and development in capital market, the need of introducing the high level of corporate governance and transparency into the business sector is indispensable. The information must be equally available to the participants of market. Generally, the primary reason of distortion of market is the availability of material information to the insiders and its usage to trade in the market which is not available to the other counterparties. The rationale behind regulating such practices is to prevent the unfairness and injustice done to the investors deprived of the UPSI. This research undertakes an analytical study of the novel legal regime introduced by which prohibition of Insider Trading is affected and the rate of compliance of the present regime. The aim of this research is to assess the specific views on the regulation of insider trading and the disparity between enactment and enforcement of insider trading regulations and lastly, to see why India lags behind   world’s developed economies, in order to suggest different measures which may be integrated in the Indian securities market to curb this widely prevalent practice.

Keywords: Prohibition, Unfair Trade Practices, Insider Trading, SEBI, Ineffective regulation, Enforcement.