Insider Trading: SEBI Cracks Down on Unfair Stock Market Practices in India
The Securities and Exchange Board of India (Sebi) is taking a stern stand against insider trading, a malpractice that gives certain individuals access to non-public information and allows them to make profitable trades at the expense of other investors.
What is Insider Trading?
Insider trading occurs when individuals, often key employees or executives with access to a company’s strategic information, use this knowledge to trade in the company’s stocks or securities. This unfair practice puts other stockholders at a significant disadvantage due to their lack of access to the same critical non-public information.
Recent High-profile Insider Trading Cases
- Bruce Garelick Case: A financial executive was accused of tipping off his boss and friends about the impending merger between Digital World Acquisition Corp. and Trump Media & Technology Group.
- The Husband and Wife Case: A husband was charged by the US Securities and Exchange Commission (SEC) for making a substantial profit by trading stocks after allegedly receiving non-public information from his wife during office calls.
Insider Trading in India
Last year, Kishore Biyani and other promoters of Future Retail Ltd. were barred from the securities market for one year after being found guilty of insider trading in shares of the company.
Preventing Insider Trading
To prevent insider trading, Sebi has been working to improve transparency and enforce stricter regulations. Key managerial personnel or insiders are currently allowed to trade, but they must not be in possession of unpublished price sensitive information (UPSI).
Ongoing Investigations
- Adani Group: Public Interest Litigations (PILs) related to allegations of stock price manipulation involving the Adani Group are being considered by the Supreme Court of India. Sebi has been conducting investigations into these claims, with a court-ordered completion date of August 14.
- Anthony Viggiano Case: Former Goldman Sachs and Blackstone analyst, Anthony Viggiano, and his associates have been charged with criminal insider trading in the United States for passing on nonpublic information about planned mergers and strategic partnerships to their friends.
Sebi’s Statement
“Insider trading creates an unequal opportunity for those who have access to unpublished price-sensitive information. It undermines the fairness and integrity of the securities market and can discourage investors,” Sebi noted in a statement.
Conclusion
As the Indian securities market continues to grow, regulatory bodies like Sebi are committed to protecting investors and ensuring a fair, transparent, and thriving financial ecosystem.