Insider Trading in Stock Market in India

Understand What is Insider Trading in Stock Market in India and Why is it illegal by SEBI.

Understand What is Insider Trading in Stock Market in India and Why is it illegal by SEBI. Real Example and Penalties.

What is Insider Trading?

In Stock Market, Insider trading refers to transactions in securities of some company executed by a company employee. When sensitive information is willingly induced in the market to influence the price of a scrip for personal profits.

• Also Read: How Stock Market Works?

Who Leaks Sensitive Information?

In most cases, an insider is someone from inside the company who knows financial information about the company before it becomes public. Insiders may include company officers and other senior executives.

Even though, most companies listed in Stock Market in India warn their employees about insider trading, it is still in practice. SEBI has strict rules against the such practices and it is a prosecutable offenses under the relevant law with heavy penalties.

Such Practice is illegal in India and many other countries.

Example:

Suppose the CEO of a Listed Company unintentionally discloses the the quarterly income of the company while going for a morning walk. If his friends use this information for share trading in Stock Market, then it will be considered as illegal, and SEBI may take action.

Real Example:

SEBI banned RIL from the derivatives sector for 1 year and levied a penalty on the company. The Company was charged with the intention of making profits by skirting regulations on its legally permissible trading limits and lowering the price of its stock in the cash market.

Also Read:

• Fundamental Analysis of a Company
• Share Trading Mistakes to Avoid
• Stock Market Trends and Signal – How to Understand

FAQs: Insider Trading

Conclusion

Insider Trading in illegal in India by SEBI. Do not get involved in it.

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