Awareness of Insider Trading
From the time when the first stock exchange was established in the Year 1602, a lot of people have tried various unethical ways to make money from it. Despite the fact that only a few are able to fool the market and make continuous profits, however, most get captured from the governing bodies. One such fraud on which most of the regulatory agencies keep having a keen vision on “Insider’s Trading”. Further, we are going to discuss what exactly is Insider trading is? why it is illegal, and how you can stay away from it. Let’s get started!
The share market can work in a well-organized manner when all the investors have the same information, by this everyone has a fair and equal chance to be successful. Here, the investors are rewarded for their analysis and expertise.
Insider Trading throws this independent and unbiased trading out the window. In insider trading people having access to confidential information take advantage of investors who are oblivious to these facts. Insider trading refers to trades made based on trading material price sensitive non-public information about the company. Insider Trading in India is governed by the regulatory body SEBI. Under the act of 1992. Anyone who is proved guilty of insider trading can be imprisoned for a maximum of 5 years and fined between Rs. 5 lakh to Rs. 25 crores or 3 times of the profit made whichever is higher. The rules governing such trades and the degree of enforcement vary remarkably country to country.
In India, the latest case of Insider trading which was in the news is of JM Financials. As per the media reports, the former vice president of the company Atul Saraogi has settled an alleged in the case of Insider Trading with Sebi which is settled by paying an amount of Rs 15 lakh as a settlement charges.
As Per the report of ET, During November 2013 to December 2016, the Securities and Exchange Board of India (Sebi) had conducted an investigation in case of alleged trading by Saraogi and his mother-in-law Mrs. Vimala Devi Kalantri.
During the investigation, Sebi observed that Saraogi had entered into off-market trades in shares of JMFL and transferred 41,246 shares to his mother-in-law in December 2013. He also have acquired 41,246 shares of JMFL through an off-market transaction from Kalantri in October 2014. Sebi noted that Saraogi had not procured pre-clearance from JMFL for the two off-market trades. Except, he had entered the off-market transaction in October 2014 when the trading window was closed.
By indulge in such trades, he allegedly violated the code of conduct of JMFL as required under PIT (Prohibition of Insider Trading) Regulations. In accordance to this, a notice was issued to Saraogi, calling upon him to show cause as to why an inquiry should not be held against him.
Subsequently, he filed an application with Sebi and proposed to settle the case under the settlement terms for alleged violation of insider trading norms. The regulator considered the proposed settlement terms and recommended the case for settlement upon payment of Rs 15.05 lakh.