SEBI Cracks Down on Insider Trading in IEX

The Securities and Exchange Board of India (SEBI) barred eight individuals from the securities market and impounded ₹173.14 crore in alleged illegal gains from trades in Indian Energy Exchange (IEX).

What is Insider Trading?

Insider trading refers to:

• Buying or selling of securities by a person who has access to unpublished price-sensitive information (UPSI).
• UPSI is confidential information that could materially affect the price of a security once made public.
• Illegal insider trading undermines market integrity and investor confidence.

Key Elements of Insider Trading:

• Insider: Directors, officers, employees, or connected persons of a listed company.
• Unpublished Price Sensitive Information (UPSI): Any info not yet in the public domain that can influence the security price.
• Trading/Tip-Off: Using UPSI for personal gain or passing it to others who trade.

SEBI Regulations to Curb Insider Trading

• SEBI (Prohibition of Insider Trading) Regulations, 2015:
  • Defines insider trading and roles of insiders.
  • Mandates disclosure of holdings and trades by promoters and directors.
  • Prohibits trading based on UPSI.
  • Regulates communication or procurement of UPSI.
• Key Provisions:
  • Trading Window: Insiders can only trade in designated periods.
  • Pre-clearance: Required for trades above a threshold.
  • Penalties: Monetary fines and market bans; disgorgement of profits.
• Monitoring & Enforcement:
  • SEBI uses trading data analytics, digital evidence, and surveillance tools.
  • Encourages whistleblowing and cooperation with other authorities.