Insider Trading in Stock Market
The SEBI (Prohibition of Insider Trading) Regulations 1992 have been notified by SEBI to prohibit and penalize insider trading in India. The Insider Trading Regulations prohibit an ‘insider’ from dealing, either on his own behalf or on behalf of any other person, in the securities of a company listed on any stock exchanges when in possession of unpublished price-sensitive information.
- All directors or offers of a listed company are required to disclose to the company the number of shares or voting rights held and positions taken derivatives by such person in such company within 2 working days of becoming a director or officer of such company; and also to make periodic disclosures of their shareholding in the company.
- The Insider Trading Regulations make it compulsory for listed companies and certain other entities associated with the securities market to establish an internal code of conduct to prevent insider trading deals and also to regulate disclosure of unpublished price-sensitive information within such entities so as to minimize misuse of such information.
- The model code of conduct has also been amended to prohibit all directors/ officers/ designated employees who buy or sell any number of shares of the company from entering into opposite transactions during the next six months following the prior transaction.
- All directors and designated employees have also been prohibited from taking positions in derivative transactions in shares of the company at any time.