{"id":24110,"date":"2026-05-11T12:12:32","date_gmt":"2026-05-11T12:12:32","guid":{"rendered":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/?p=24110"},"modified":"2026-05-11T12:18:04","modified_gmt":"2026-05-11T12:18:04","slug":"regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals","status":"publish","type":"post","link":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/","title":{"rendered":"Regulatory And Compliance Gaps In Corporate Fraud And Insider Trading: Lessons For Prevention From Major Indian Scandals"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\" id=\"introduction-to-insider-trading\"><span class=\"ez-toc-section\" id=\"Introduction\"><\/span>Introduction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In general, insider trading is the trading of securities by individuals who have unpublished price-sensitive information (UPSI) not available to the general population [1]. In the Indian context, insider trading is mainly regulated by the SEBI (Prohibition of Insider Trading) Regulations 2015 that seek to promote fairness, transparency and integrity in the securities market [2]. Fundamentally, insider trading is the misuse of confidential information to have an unfair advantage, in the form of profits or the prevention of possible losses [3].<\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_83 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #0c0c0c;color:#0c0c0c\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #0c0c0c;color:#0c0c0c\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Introduction\" >Introduction<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Historical_Development_of_Insider_Trading_Laws_in_India\" >Historical Development of Insider Trading Laws in India<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Understanding_UPSI_and_Insiders\" >Understanding UPSI and Insiders<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Meaning_of_Unpublished_Price-Sensitive_Information_UPSI\" >Meaning of Unpublished Price-Sensitive Information (UPSI)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Definition_and_Scope_of_Insider\" >Definition and Scope of Insider<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Theoretical_Perspectives_on_Insider_Trading\" >Theoretical Perspectives on Insider Trading<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Arguments_Supporting_Insider_Trading\" >Arguments Supporting Insider Trading<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Criticisms_and_Negative_Impact_of_Insider_Trading\" >Criticisms and Negative Impact of Insider Trading<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Research_Gap_and_Scope_of_Study\" >Research Gap and Scope of Study<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Objectives_of_the_Study\" >Objectives of the Study<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Key_Features_of_Insider_Trading\" >Key Features of Insider Trading<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#12_Study_Objective\" >1.2 Study Objective<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#1_To_Discuss_the_Sense_and_Definition_of_Insider_Trading\" >1. To Discuss the Sense and Definition of Insider Trading<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#2_To_Learn_the_Evolution_of_the_Insider_Trading_Laws_in_India\" >2. To Learn the Evolution of the Insider Trading Laws in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#3_To_Form_a_Picture_of_the_Regulatory_Environment_and_Compliance_Measures\" >3. To Form a Picture of the Regulatory Environment and Compliance Measures<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#4_To_Study_Judicial_and_Administrative_Senses\" >4. To Study Judicial and Administrative Senses<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#5_To_Explore_an_Economic_and_Ethical_Issue_of_Insider_Trading\" >5. To Explore an Economic and Ethical Issue of Insider Trading<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#6_To_Diagnose_the_Issues_and_Inefficiencies_in_the_Existing_Structure\" >6. To Diagnose the Issues and Inefficiencies in the Existing Structure<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#7_To_Propose_Policy_and_Reforms\" >7. To Propose Policy and Reforms<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#13_Research_Methodology\" >1.3 Research Methodology<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#131_Nature_of_Research\" >1.3.1 Nature of Research<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#132_Research_Approach\" >1.3.2 Research Approach<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#133_Sources_of_Data\" >1.3.3. Sources of Data<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Primary_Legal_Sources\" >Primary Legal Sources<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Judicial_and_Quasi-Judicial_Decisions\" >Judicial and Quasi-Judicial Decisions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Committee_Reports_and_Policy_Documents\" >Committee Reports and Policy Documents<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Secondary_Literature\" >Secondary Literature<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Online_Databases_and_Official_Publications\" >Online Databases and Official Publications<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#134_Method_of_Analysis\" >1.3.4. Method of Analysis<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#135_Scope_and_Limitations\" >1.3.5. Scope and Limitations<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-31\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#14_Insider_Trading_in_India\" >1.4. Insider Trading in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-32\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#15_Development_of_the_Regulatory_Framework\" >1.5. Development of the Regulatory Framework<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-33\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Major_Powers_of_SEBI\" >Major Powers of SEBI<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-34\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#16_The_2015_Regulations\" >1.6. The 2015 Regulations<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-35\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Objectives_of_the_2015_Regulations\" >Objectives of the 2015 Regulations<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-36\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Issues_and_Gaps_in_the_Indian_Framework\" >Issues and Gaps in the Indian Framework<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-37\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#171_Enforcement_Inefficiency\" >1.7.1. Enforcement Inefficiency<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-38\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#172_Evidentiary_Challenges\" >1.7.2. Evidentiary Challenges<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-39\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#173_Limited_Extraterritorial_Reach\" >1.7.3. Limited Extraterritorial Reach<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-40\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#174_Lack_of_Individual_Right_of_Action\" >1.7.4. Lack of Individual Right of Action<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-41\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#175_Institutional_Constraints\" >1.7.5. Institutional Constraints<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-42\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#176_Regulatory_Ambiguities\" >1.7.6. Regulatory Ambiguities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-43\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#177_Compliance_Burden\" >1.7.7. Compliance Burden<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-44\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#178_Lack_of_Whistleblower_Incentives\" >1.7.8. Lack of Whistleblower Incentives<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-45\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#179_Delay_in_Investigations\" >1.7.9. Delay in Investigations<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-46\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#1710_Excessive_Use_of_Financial_Punishments\" >1.7.10. Excessive Use of Financial Punishments<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-47\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#18_Case_Study_and_Law\" >1.8. Case Study and Law<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-48\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#19_Conclusion\" >1.9. Conclusion<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-49\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/regulatory-and-compliance-gaps-in-corporate-fraud-and-insider-trading-lessons-for-prevention-from-major-indian-scandals\/#Key_Takeaways\" >Key Takeaways<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<p>As the main regulatory body of the stock market, the Securities and Exchange Board of India (SEBI) plays a key role in the country [4]. The Indian securities market does not allow insider trading and other market manipulation. Violations can be punishable by very serious means, such as fines, forfeiture of illegal profits, suspension of the right to trade in securities and, in some cases, criminal responsibility leading to a prison term.<\/p>\n\n\n\n<p>It should not be neglected, though, that insider trading is different from other areas of regulation, like substantial acquisition of shares and control (subject to takeover regulations) or fraudulent and unfair trade practices, even though they all fit into a broader remit of SEBI to control market behaviour.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"historical-development-of-insider-trading-laws-in-india\"><span class=\"ez-toc-section\" id=\"Historical_Development_of_Insider_Trading_Laws_in_India\"><\/span>Historical Development of Insider Trading Laws in India<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The idea behind the regulation of insider trading in India dates back to the suggestions of the Abid Hussain Committee (1989), which accepted insider trading as a civil and criminal offence and the importance of a strong regulatory framework [5].<\/p>\n\n\n\n<p>Such suggestions ultimately resulted in the development of an insider trading regime in India, leading to the overall SEBI (Prohibition of Insider Trading) Regulations, 2015 [6], which are more global-friendly standards.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"understanding-upsi-and-insiders\"><span class=\"ez-toc-section\" id=\"Understanding_UPSI_and_Insiders\"><\/span>Understanding UPSI and Insiders<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"meaning-of-unpublished-price-sensitive-information\"><span class=\"ez-toc-section\" id=\"Meaning_of_Unpublished_Price-Sensitive_Information_UPSI\"><\/span>Meaning of Unpublished Price-Sensitive Information (UPSI)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>An important aspect of insider trading is the unpublished price-sensitive information (UPSI). Under Indian law, UPSI is any information which is not generally available and which, when it becomes public, will have a material impact on the price of securities [7].<\/p>\n\n\n\n<p>Such data usually involves:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Financial performance<\/li>\n\n\n\n<li>Dividends<\/li>\n\n\n\n<li>Mergers and acquisitions<\/li>\n\n\n\n<li>Alterations in capital structure<\/li>\n\n\n\n<li>Major managerial decisions<\/li>\n<\/ul>\n\n\n\n<p>The information materiality is central. Price-sensitive information is only the kind of information that will affect the decision of an investor.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"definition-and-scope-of-insider\"><span class=\"ez-toc-section\" id=\"Definition_and_Scope_of_Insider\"><\/span>Definition and Scope of Insider<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The term &#8216;insider&#8217; is described as referring to any individual who possesses or has access to UPSI [9]. This encompasses not only the directors and other key managerial staff, but also the professionals and other intermediaries like auditors, bankers, legal advisors, consultants, and even related individuals who have a fiduciary or contractual relationship with the company.<\/p>\n\n\n\n<p>The definition indicates the reflection of the large scope of people who might access sensitive corporate information in modern financial markets.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"theoretical-perspectives-on-insider-trading\"><span class=\"ez-toc-section\" id=\"Theoretical_Perspectives_on_Insider_Trading\"><\/span>Theoretical Perspectives on Insider Trading<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"arguments-supporting-insider-trading\"><span class=\"ez-toc-section\" id=\"Arguments_Supporting_Insider_Trading\"><\/span>Arguments Supporting Insider Trading<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Theoretically, insider trading has long been investigated in academic research debate. Some scholars like Henry G. Manne have suggested that insider trading can, in some cases, be acceptable under certain conditions and improve market efficiency by adding more information to the stock prices faster and by rewarding managerial performance [10].<\/p>\n\n\n\n<p>Manne was a well-known description of insider trading as the art of the corporate agents to deal in the securities of their company on the principle of undisclosed, price-relevant information.<\/p>\n\n\n\n<p>Likewise, the agency relationship-based theory of economics, including Michael C. Jensen and William H. Meckling, opines that insider trading may bring the interests of managers and shareholders together.<\/p>\n\n\n\n<p>There are also some empirical studies that claim that insider trading can help generate price discovery and market efficiency through diminishing information asymmetry [11].<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"criticisms-and-negative-impact-of-insider-trading\"><span class=\"ez-toc-section\" id=\"Criticisms_and_Negative_Impact_of_Insider_Trading\"><\/span>Criticisms and Negative Impact of Insider Trading<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>These are, however, strongly argued out. Those who are against it highlight that the essence of a playing field in securities markets is undermined by insider trading.<\/p>\n\n\n\n<p>It will gain at the cost of average investors, erode confidence and may put people off capital markets.<\/p>\n\n\n\n<p>Some of its negative implications on corporate governance have also been identified by scholars, including fairness in the market and economic stability [12].<\/p>\n\n\n\n<p>Ethical criticisms also assert that although insider trading is a contributor to efficiency, it is intrinsically unfair since it is the exploitation of the benefits of information at the cost of ignorant players [13].<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"research-gap-and-scope-of-study\"><span class=\"ez-toc-section\" id=\"Research_Gap_and_Scope_of_Study\"><\/span>Research Gap and Scope of Study<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Although there has been wide scholarly interest, the literature on insider trading is still disjointed, and research tends to be jurisdiction- or theoretically orientated or narrow in scope, including executive behaviour.<\/p>\n\n\n\n<p>Although the development of history has been explored in previous studies, regulatory frameworks, or regional practices, there is an increasing call to have a holistic and systematic review of research on insider trading.<\/p>\n\n\n\n<p>This is especially applicable due to the high rate of literary growth of recent years, dealing with behavioural, regulatory, and economic dimensions of insider trading.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"objectives-of-the-study\"><span class=\"ez-toc-section\" id=\"Objectives_of_the_Study\"><\/span>Objectives of the Study<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It is on this basis that this study aims to offer a comprehensive insight into insider trading through a combination of structured analysis of academic literature and doctrinal analysis of the law.<\/p>\n\n\n\n<p>It aims to:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Examine patterns of research<\/li>\n\n\n\n<li>Distinguish effective contributions<\/li>\n\n\n\n<li>Examine important themes<\/li>\n\n\n\n<li>Point out gaps in existing scholarship<\/li>\n<\/ul>\n\n\n\n<p>In such a way, the research helps to get a better insight into insider trading, especially within the Indian regulatory framework, but also by locating it in the wider world and theoretical arguments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"key-features-of-insider-trading\"><span class=\"ez-toc-section\" id=\"Key_Features_of_Insider_Trading\"><\/span>Key Features of Insider Trading<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Feature<\/th><th>Description<\/th><\/tr><\/thead><tbody><tr><td>Unpublished Information<\/td><td>Use of material information not available to the public<\/td><\/tr><tr><td>Unfair Advantage<\/td><td>Trading based on confidential information for profit or loss prevention<\/td><\/tr><tr><td>Informational Asymmetry<\/td><td>Unequal access to information between insiders and general investors<\/td><\/tr><tr><td>Market Integrity Concerns<\/td><td>Potential damage to investor confidence and transparency<\/td><\/tr><tr><td>Materiality Principle<\/td><td>Only information capable of affecting investment decisions is considered price-sensitive<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>The key features of insider trading can be summarised as the publication of material, unpublished information that is non-public; trading in such information or acquiring an unfair advantage; the following informational asymmetry between insiders and the general population; possible damage to investor confidence and market integrity; and the key role played by materiality in deciding the nature of the information.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"study-objective\"><span class=\"ez-toc-section\" id=\"12_Study_Objective\"><\/span>1.2 Study Objective<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Overall, the aim of the research is to critically comment on such notions as insider trading, regulation and the implications of insider trading within the Indian securities market. In particular, the law and the regulation which are going to be analysed in the study will be the law and the regulation which regulate insider trading in the SEBI (Prohibition of Insider Trading) Regulations, 2015, and discuss their efficiency in terms of permitting the fair and transparent market operation.<\/p>\n\n\n\n<p>To be more specific, the study will attempt to:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"discussion-on-insider-trading-definition\"><span class=\"ez-toc-section\" id=\"1_To_Discuss_the_Sense_and_Definition_of_Insider_Trading\"><\/span>1. To Discuss the Sense and Definition of Insider Trading<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The paper will accomplish the definition, nature and main peculiarities of insider trading, the concept of inclusion of the role of unpublished price-sensitive information (UPSI), the concept of materiality and the classification of insiders under Indian law.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"evolution-of-insider-trading-laws-in-india\"><span class=\"ez-toc-section\" id=\"2_To_Learn_the_Evolution_of_the_Insider_Trading_Laws_in_India\"><\/span>2. To Learn the Evolution of the Insider Trading Laws in India<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>These will entail the study of how the attention of the regulation framework has changed since the guidelines of the Abid Hussain Committee up to the present system that outlines the most significant concerns, reforms and their logicality.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Development of insider trading regulations in India<\/li>\n\n\n\n<li>Role of reform committees and legal amendments<\/li>\n\n\n\n<li>Transformation of the regulatory framework over time<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"regulatory-environment-and-compliance-measures\"><span class=\"ez-toc-section\" id=\"3_To_Form_a_Picture_of_the_Regulatory_Environment_and_Compliance_Measures\"><\/span>3. To Form a Picture of the Regulatory Environment and Compliance Measures<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The roles of the Securities and Exchange Board of India in detecting, investigating and imposing penalties on insider trading as well as an account of its powers, procedures and enforcement are fundamentally engaged in the present paper.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Regulatory Aspect<\/th><th>Focus Area<\/th><\/tr><\/thead><tbody><tr><td>Detection<\/td><td>Monitoring suspicious trading activities<\/td><\/tr><tr><td>Investigation<\/td><td>Inquiry and evidence collection procedures<\/td><\/tr><tr><td>Enforcement<\/td><td>Penalties and adjudication powers of SEBI<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"judicial-and-administrative-analysis\"><span class=\"ez-toc-section\" id=\"4_To_Study_Judicial_and_Administrative_Senses\"><\/span>4. To Study Judicial and Administrative Senses<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It involves studies of the most relevant case laws and SEBI orders to study how the laws on insider trading have been debated and practised.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"economic-and-ethical-issues-of-insider-trading\"><span class=\"ez-toc-section\" id=\"5_To_Explore_an_Economic_and_Ethical_Issue_of_Insider_Trading\"><\/span>5. To Explore an Economic and Ethical Issue of Insider Trading<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The analysis has tried to test the rival theoretical treatments, such as arguments that have to deal with market efficiency, fairness, and protection of investors.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Market efficiency concerns<\/li>\n\n\n\n<li>Fairness in securities trading<\/li>\n\n\n\n<li>Protection of investor interests<\/li>\n\n\n\n<li>Ethical dimensions of insider trading<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"issues-and-inefficiencies-in-existing-structure\"><span class=\"ez-toc-section\" id=\"6_To_Diagnose_the_Issues_and_Inefficiencies_in_the_Existing_Structure\"><\/span>6. To Diagnose the Issues and Inefficiencies in the Existing Structure<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>These issues will be specifically addressed because of the distinct areas of concern: enforcement issues, evidentiary issues, technological issues, regulatory loopholes and challenges.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"policy-recommendations-and-reforms\"><span class=\"ez-toc-section\" id=\"7_To_Propose_Policy_and_Reforms\"><\/span>7. To Propose Policy and Reforms<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>With the assistance of the analysis system, the study will provide recommendations on how the regulation system can be improved in order to streamline the insider trading law in India.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"research-methodology\"><span class=\"ez-toc-section\" id=\"13_Research_Methodology\"><\/span>1.3 Research Methodology<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The type of research considered is pure secondary research. The paper&#8217;s research design is the doctrinal and analytical research design that seeks to explore the legal and regulatory and theoretical aspects of insider trading in India.<\/p>\n\n\n\n<p>This analysis primarily depends on the secondary source of data in the form of information, and this has been backed by a peer critique and synthesis of law and scholarly volumes.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"nature-of-research\"><span class=\"ez-toc-section\" id=\"131_Nature_of_Research\"><\/span>1.3.1 Nature of Research<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The existing study is a qualitative study that entails examination and scrutiny of law, legal provisions and administrative practices that are relevant to insider trading.<\/p>\n\n\n\n<p>It does not just attempt to give an explanation of the legal system as it stands but also takes a critical look at its effectiveness and what needs to be reformed.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Research Component<\/th><th>Description<\/th><\/tr><\/thead><tbody><tr><td>Research Type<\/td><td>Qualitative Research<\/td><\/tr><tr><td>Research Focus<\/td><td>Legal provisions and administrative practices<\/td><\/tr><tr><td>Research Objective<\/td><td>Critical evaluation of effectiveness and reforms<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"research-approach\"><span class=\"ez-toc-section\" id=\"132_Research_Approach\"><\/span>1.3.2 Research Approach<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The application of a doctrinal (black-letter law) approach to law regulating insider trading, and in particular, of the SEBI (Prohibition of Insider Trading) Act, 2015 and the Securities and Exchange Board of India Act, 1992, has been applied to the statute.<\/p>\n\n\n\n<p>This is done through a line-by-line analysis of the text of legislation, definitions and regulation mechanisms.<\/p>\n\n\n\n<p>Also, an analytical and comparative approach&#8217;s value has been applied in measuring the effectiveness of the Indian regulatory framework and putting it in a broader theoretical and, where possible, a global reference.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Doctrinal (black-letter law) analysis<\/li>\n\n\n\n<li>Analytical legal interpretation<\/li>\n\n\n\n<li>Comparative regulatory evaluation<\/li>\n\n\n\n<li>Examination of Indian and global regulatory practices<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"sources-of-data\"><span class=\"ez-toc-section\" id=\"133_Sources_of_Data\"><\/span>1.3.3. Sources of Data<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The research is based solely on secondary data, namely, the data gathered by the following sources:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"primary-legal-sources\"><span class=\"ez-toc-section\" id=\"Primary_Legal_Sources\"><\/span>Primary Legal Sources<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Rules, regulations and statutes that dictate insider trading, such as SEBI regulations.<\/li>\n\n\n\n<li>Relevant securities law.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"judicial-and-quasi-judicial-decisions\"><span class=\"ez-toc-section\" id=\"Judicial_and_Quasi-Judicial_Decisions\"><\/span>Judicial and Quasi-Judicial Decisions<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Court decisions and orders issued by the Securities and Exchange Board of India and the Court of Appeal interpreting insider trading laws.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"committee-reports-and-policy-documents\"><span class=\"ez-toc-section\" id=\"Committee_Reports_and_Policy_Documents\"><\/span>Committee Reports and Policy Documents<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Reports that include those of the Abid Hussain Committee and other regulatory or expert bodies.<\/li>\n\n\n\n<li>Committee recommendations.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"secondary-literature\"><span class=\"ez-toc-section\" id=\"Secondary_Literature\"><\/span>Secondary Literature<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Peer-reviewed journal articles, research papers, commentaries, legal documents, and textbooks.<\/li>\n\n\n\n<li>Insider trading, market regulation and corporate governance analyses.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"online-databases-and-official-publications\"><span class=\"ez-toc-section\" id=\"Online_Databases_and_Official_Publications\"><\/span>Online Databases and Official Publications<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>SEBI publications, official websites, and well-known legal and financial databases.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"method-of-analysis\"><span class=\"ez-toc-section\" id=\"134_Method_of_Analysis\"><\/span>1.3.4. Method of Analysis<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Data collected have been analysed using descriptive analysis to describe legal provisions and concepts; critical analysis to assess the strengths and weaknesses of the regulatory framework; and thematic analysis to determine recurring problems like enforcement problems, UPSI interpretation, and insider liability.<\/p>\n\n\n\n<p>The case law analysis to comprehend the practical is also included in the study, where the appropriate implementation of insider trading laws is discussed.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"scope-and-limitations\"><span class=\"ez-toc-section\" id=\"135_Scope_and_Limitations\"><\/span>1.3.5. Scope and Limitations<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The paper is limited to the Indian legal system of insider trading and, to a small extent, the invocation of international views to understand the context [14]. It does not involve empirical or field-based research and can only be limited to the existing secondary data [15].<\/p>\n\n\n\n<p>Consequently, the results are reliant on the correctness and the extent of current writings and reports and decisions [16].<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"insider-trading-in-india\"><span class=\"ez-toc-section\" id=\"14_Insider_Trading_in_India\"><\/span>1.4. Insider Trading in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>India, being one of the fastest-growing economies in the world, has experienced tremendous growth in its financial markets [17]. But this tremendous expansion has been noted to be accompanied by an equal increase in financial fraud, such as insider trading [18].<\/p>\n\n\n\n<p>Insider trading is also one of the most widespread and complex issues facing the regulation of securities markets, as it has a direct negative impact on investors&#8217; trust and the concept of fairness [19] in the market.<\/p>\n\n\n\n<p>It is important that effective regulation be necessary in this sphere in order to have a level playing field between the two local and foreign investors [20].<\/p>\n\n\n\n<p>It is indicative of the insider trading prevalence in the previous decades. In a comment by one of the former presidents of the Bombay Stock Exchange in 1992, he noted that insider trading was one of the dominant aspects of trading in India, and retail investors only received information when it was already capitalised on by insiders [21].<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Key Issue<\/th><th>Impact on Securities Market<\/th><\/tr><\/thead><tbody><tr><td>Insider Trading<\/td><td>Reduces investor confidence and market fairness<\/td><\/tr><tr><td>Unequal Access to Information<\/td><td>Creates an unfair advantage for insiders<\/td><\/tr><tr><td>Weak Market Integrity<\/td><td>Affects domestic and foreign investment<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"development-of-the-regulatory-framework\"><span class=\"ez-toc-section\" id=\"15_Development_of_the_Regulatory_Framework\"><\/span>1.5. Development of the Regulatory Framework<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The setting up of the Securities and Exchange Board of India was a turning point in the governance of the Indian securities market [22].<\/p>\n\n\n\n<p>SEBI was established in 1988 as an administrative body in the first place and has been accorded statutory status by the passage of the Securities and Exchange Board of India Act, 1992 [23].<\/p>\n\n\n\n<p>SEBI has a responsibility to safeguard investor interests under Section 11 of the Act, which also encourages the promotion of work in the securities market [24], and controls its operations.<\/p>\n\n\n\n<p>Specifically, Section 11(2)(g) identifies insider trading prevention [25] as one of the primary missions of SEBI.<\/p>\n\n\n\n<p>Moreover, insider trading and dealing in securities are strictly forbidden in Section 12A of the SEBI Act when he\/she has material or non-public information [26].<\/p>\n\n\n\n<p>Section 15G supports enforcement, which imposes civil fines up to a maximum of 25 crore or thrice the profit earned, whichever is higher [27].<\/p>\n\n\n\n<p>Further, in Section 24, there is criminal liability, such as imprisonment of up to ten years [28].<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"major-powers-of-sebi\"><span class=\"ez-toc-section\" id=\"Major_Powers_of_SEBI\"><\/span>Major Powers of SEBI<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>SEBI Provision<\/th><th>Purpose<\/th><\/tr><\/thead><tbody><tr><td>Section 11<\/td><td>Protection of investor interests and regulation of securities market<\/td><\/tr><tr><td>Section 11(2)(g)<\/td><td>Prevention of insider trading<\/td><\/tr><tr><td>Section 12A<\/td><td>Prohibits trading using unpublished price-sensitive information<\/td><\/tr><tr><td>Section 15G<\/td><td>Provides civil penalties for insider trading violations<\/td><\/tr><tr><td>Section 24<\/td><td>Provides criminal liability and imprisonment<\/td><\/tr><tr><td>Section 30<\/td><td>Empowers SEBI to frame regulations<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>SEBI used its powers under Section 30 to introduce and operationalise these statutory provisions.<\/p>\n\n\n\n<p>The first of these was the SEBI (Prohibition of Insider Trading) Regulations, 1992, a comprehensive regulatory framework to deal with insider trading in India [29].<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"the-2015-regulations\"><span class=\"ez-toc-section\" id=\"16_The_2015_Regulations\"><\/span>1.6. The 2015 Regulations<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>With the understanding of the shortcomings of the 1992 framework, SEBI formed the Sodhi Committee [30] to carry out an extensive review.<\/p>\n\n\n\n<p>According to its suggestions, the SEBI Prohibition of Insider Trading Regulations, 2015 [31], sought to:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Observe Indian law with the best international practices;<\/li>\n\n\n\n<li>Define better important concepts like UPSI and connected persons;<\/li>\n\n\n\n<li>Enhance enforcement systems; and<\/li>\n\n\n\n<li>Support the legitimate business dealings and avoid abuse [32].<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"objectives-of-the-2015-regulations\"><span class=\"ez-toc-section\" id=\"Objectives_of_the_2015_Regulations\"><\/span>Objectives of the 2015 Regulations<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Objective<\/th><th>Purpose<\/th><\/tr><\/thead><tbody><tr><td>Alignment with Global Standards<\/td><td>Improve consistency with international insider trading laws<\/td><\/tr><tr><td>Clearer Definitions<\/td><td>Reduce ambiguity relating to UPSI and connected persons<\/td><\/tr><tr><td>Stronger Enforcement<\/td><td>Improve regulatory monitoring and penalties<\/td><\/tr><tr><td>Protection of Legitimate Transactions<\/td><td>Balance compliance with genuine business activities<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"issues-and-gaps-in-the-indian-framework\"><span class=\"ez-toc-section\" id=\"Issues_and_Gaps_in_the_Indian_Framework\"><\/span>Issues and Gaps in the Indian Framework<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In India, the insider trading regulation is still challenged by the lack of control, in spite of the reinforced legal framework and a number of organisational and operational issues [33].<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"enforcement-inefficiency\"><span class=\"ez-toc-section\" id=\"171_Enforcement_Inefficiency\"><\/span>1.7.1. Enforcement Inefficiency<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Insider trading has been termed an unwinnable war, given the fact that it is difficult to detect and prosecute. Many cases go undetected, and even in those cases that are investigated, the successful cases are very minimal, and prosecution is rare. There is a tendency towards reactive enforcement as opposed to being proactive [34].<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Difficulty in detecting insider trading activities<\/li>\n\n\n\n<li>Low prosecution and conviction rates<\/li>\n\n\n\n<li>Predominantly reactive enforcement approach<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"evidentiary-challenges\"><span class=\"ez-toc-section\" id=\"172_Evidentiary_Challenges\"><\/span>1.7.2. Evidentiary Challenges<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>To prove that insider trading occurred, one must prove that there was possession and misuse of UPSI, which is not uncommon circumstantially [35].<\/p>\n\n\n\n<p>In contrast with other jurisdictions, like the United States, Indian regulators do not have access to tools, including telephone interception, which came in handy in such cases as the one with Raj Rajaratnam [36].<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Issue<\/th><th>Impact on Enforcement<\/th><\/tr><\/thead><tbody><tr><td>Difficulty proving misuse of UPSI<\/td><td>Weakens prosecution efforts<\/td><\/tr><tr><td>Lack of surveillance tools<\/td><td>Limits evidence collection<\/td><\/tr><tr><td>Reliance on circumstantial evidence<\/td><td>Complicates legal proceedings<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"limited-extraterritorial-reach\"><span class=\"ez-toc-section\" id=\"173_Limited_Extraterritorial_Reach\"><\/span>1.7.3. Limited Extraterritorial Reach<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The Indian law is hardly applicable outside the country; thus, it is hard to control cross-border insider trading. Although there are mechanisms like the Mutual Legal Assistance Treaties [37], they are narrow in range and power.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"lack-of-individual-right-of-action\"><span class=\"ez-toc-section\" id=\"174_Lack_of_Individual_Right_of_Action\"><\/span>1.7.4. Lack of Individual Right of Action<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Indian investors are not able to independently commence civil unlike in jurisdictions like the United States, insider trading proceedings. Section 26 of the SEBI Act limits prosecution to SEBI-filed complaints, curtailing investor involvement in enforcement [38].<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"institutional-constraints\"><span class=\"ez-toc-section\" id=\"175_Institutional_Constraints\"><\/span>1.7.5. Institutional Constraints<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>SEBI is both a legislator, an executive and a quasi-judicial body, and this raises concerns when it comes to overburdening and institutional specialisation [39].<\/p>\n\n\n\n<p>Also, there is a shortage of manpower, and there are also resources that limit effective enforcement.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Overlapping institutional roles<\/li>\n\n\n\n<li>Limited manpower availability<\/li>\n\n\n\n<li>Resource constraints affecting investigations<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"regulatory-ambiguities\"><span class=\"ez-toc-section\" id=\"176_Regulatory_Ambiguities\"><\/span>1.7.6. Regulatory Ambiguities<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Some of the regulations are vague, such as imprecise words like &#8220;generally regulated information&#8221; and &#8220;non-discriminatory basis&#8221;; loose definitions of a &#8220;connected person&#8221; and &#8220;trading&#8221;; and uncertainty on trading plans and exceptions [40] to due diligence.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"compliance-burden\"><span class=\"ez-toc-section\" id=\"177_Compliance_Burden\"><\/span>1.7.7. Compliance Burden<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The increased compliance officer responsibility and wide disclosure demands place a large burden on the compliance officers&#8217; loads at firms, especially big organisations that have complicated structures.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"lack-of-whistleblower-incentives\"><span class=\"ez-toc-section\" id=\"178_Lack_of_Whistleblower_Incentives\"><\/span>1.7.8. Lack of Whistleblower Incentives<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In comparison to other jurisdictions, India does not have a strong system to motivate whistleblowers, which restricts the identification of insider trading [41].<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"delay-in-investigations\"><span class=\"ez-toc-section\" id=\"179_Delay_in_Investigations\"><\/span>1.7.9. Delay in Investigations<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Investigations do not have any time limit on how they should be done, thus resulting in long processes and possible destruction of evidence [42].<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"excessive-use-of-financial-punishments\"><span class=\"ez-toc-section\" id=\"1710_Excessive_Use_of_Financial_Punishments\"><\/span>1.7.10. Excessive Use of Financial Punishments<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The common dealing with consent orders and fines, instead of criminal charges, can lessen the deterring effect of insider trading regulations [43].<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"case-study-and-law\"><span class=\"ez-toc-section\" id=\"18_Case_Study_and_Law\"><\/span>1.8. Case Study and Law<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The laws that regulate insider trading in India include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Securities and Exchange Board of India Act, 1992;<\/li>\n\n\n\n<li>The Companies Act, 2013; and<\/li>\n\n\n\n<li>SEBI (Prohibition of Insider Trading) Regulations, 2015 [44].<\/li>\n<\/ul>\n\n\n\n<p>An interesting example of how the insider trading law may be used is in the case of Hindustan Lever Ltd v. SEBI [45].<\/p>\n\n\n\n<p>This is a case where Hindustan Lever Ltd. acquired shares of Brook Bond Lipton India Ltd. soon before a merger announcement. SEBI believed that HLL was an insider because of its association with the parent company and possession of UPSI concerning the merger, thus breaching the insider trading laws.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Case<\/th><th>Key Issue<\/th><th>Outcome<\/th><\/tr><\/thead><tbody><tr><td>Hindustan Lever Ltd v. SEBI [45]<\/td><td>Use of UPSI before merger announcement<\/td><td>SEBI treated HLL as an insider under insider trading regulations<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"conclusion\"><span class=\"ez-toc-section\" id=\"19_Conclusion\"><\/span>1.9. Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In conclusion, whereas India has developed a sophisticated legal framework to regulate insider trading, there are significant enforcement, clarity and institutional capacity issues.<\/p>\n\n\n\n<p>A gradual move toward addressing these concerns is the changes in the 2015-2016 regulations introduced to establish improvements over the 1992 ones, although they have inherent gaps which need further regulation.<\/p>\n\n\n\n<p>The measures that are required in order to be in a position to guarantee a better insider trading regime are the strengthening of surveillance mechanisms, the strengthening of international co-operation and heightened regulatory transparency.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"key-takeaways\"><span class=\"ez-toc-section\" id=\"Key_Takeaways\"><\/span>Key Takeaways<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India has strengthened insider trading regulations over time.<\/li>\n\n\n\n<li>Enforcement and evidentiary challenges continue to exist.<\/li>\n\n\n\n<li>Cross-border insider trading remains difficult to regulate.<\/li>\n\n\n\n<li>Institutional and compliance burdens affect regulatory efficiency.<\/li>\n\n\n\n<li>Greater transparency and international cooperation are necessary.<\/li>\n<\/ul>\n\n\n\n<p><strong>End Notes:<\/strong><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Kesarwani, T., &amp; Srivastava, A. (2026). INSIDER TRADING REGULATIONS IN INDIA AND THE UNITED STATES: A COMPARATIVE LEGAL ANALYSIS. <em>LawFoyer International Journal of Doctrinal Legal Research<\/em>, 4(1), 1835\u20131866.<br>DOI: https:\/\/doi.org\/10.70183\/lijdlr.2026.v04.81<\/li>\n\n\n\n<li>SEBI (Prohibition of Insider Trading) Regulations, 2015, Gazette of India, Extraordinary, pt. III, sec. 4.<\/li>\n\n\n\n<li>Stephen M. Bainbridge, <em>Insider Trading Law and Policy<\/em> (2d ed. 2014).<\/li>\n\n\n\n<li>Securities and Exchange Board of India Act, No. 15 of 1992, 11 (India).<\/li>\n\n\n\n<li>Gov\u2019t of India, <em>Report of the Abid Hussain Committee on Capital Markets<\/em> (1989).<\/li>\n\n\n\n<li>SEBI (Prohibition of Insider Trading) Regulations, 2015.<\/li>\n\n\n\n<li>Id. reg. 2(1)(n).<\/li>\n\n\n\n<li>Id.<\/li>\n\n\n\n<li>Id. reg. 2(1)(g).<\/li>\n\n\n\n<li>Henry G. Manne, <em>Insider Trading and the Stock Market<\/em> 76\u201377 (1966).<\/li>\n\n\n\n<li>Michael C. Jensen &amp; William H. Meckling, Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure, 3 J. Fin. Econ. 305 (1976).<\/li>\n\n\n\n<li>Victor Brudney, Insiders, Outsiders, and Informational Advantages Under the Federal Securities Laws, 93 Harv. L. Rev. 322 (1979).<\/li>\n\n\n\n<li>Frank H. Easterbrook, Insider Trading as an Agency Problem, 1981 Sup. Ct. Rev. 309.<\/li>\n\n\n\n<li>V.K. Bhalla, <em>Investment Management<\/em> (S. Chand 2018).<\/li>\n\n\n\n<li>Id.<\/li>\n\n\n\n<li>Id.<\/li>\n\n\n\n<li>Reserve Bank of India, <em>Annual Report<\/em> (latest ed.).<\/li>\n\n\n\n<li>SEBI, <em>Annual Report<\/em> (latest ed.).<\/li>\n\n\n\n<li>Stephen M. Bainbridge, <em>Insider Trading Law and Policy<\/em> (2d ed. 2014).<\/li>\n\n\n\n<li>Id.<\/li>\n\n\n\n<li>BSE Historical Commentary (1992) (archival source).<\/li>\n\n\n\n<li>Securities and Exchange Board of India Act, No. 15 of 1992 (India).<\/li>\n\n\n\n<li>Id.<\/li>\n\n\n\n<li>Id. 11.<\/li>\n\n\n\n<li>Id. 11(2)(g).<\/li>\n\n\n\n<li>Id. 12A.<\/li>\n\n\n\n<li>Id. 15G<\/li>\n\n\n\n<li>Id. 24.<\/li>\n\n\n\n<li>SEBI (Prohibition of Insider Trading) Regulations, 1992.<\/li>\n\n\n\n<li>SEBI, <em>Report of the Sodhi Committee<\/em> (2013).<\/li>\n\n\n\n<li>SEBI (Prohibition of Insider Trading) Regulations, 2015.<\/li>\n\n\n\n<li>Id.<\/li>\n\n\n\n<li>Umakanth Varottil, Insider Trading in India: A Critical Analysis, Nat\u2019l L. Sch. Rev.<\/li>\n\n\n\n<li>Id.<\/li>\n\n\n\n<li>Id.<\/li>\n\n\n\n<li>United States v. Rajaratnam, 719 F.3d 139 (2d Cir. 2013).<\/li>\n\n\n\n<li>OECD, <em>Cross-Border Enforcement in Securities Markets<\/em>.<\/li>\n\n\n\n<li>Securities and Exchange Board of India Act, 1992.<\/li>\n\n\n\n<li>Id.<\/li>\n\n\n\n<li>SEBI (Prohibition of Insider Trading) Regulations, 2015.<\/li>\n\n\n\n<li>Id.<\/li>\n\n\n\n<li>SEBI Consultation Papers.<\/li>\n\n\n\n<li>Id.<\/li>\n\n\n\n<li>Securities and Exchange Board of India Act, 1992; Companies Act, 2013; SEBI PIT Regulations, 2015.<\/li>\n\n\n\n<li>Hindustan Lever Ltd v. SEBI, (1998) SAT Order.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>Introduction In general, insider trading is the trading of securities by individuals who have unpublished price-sensitive information (UPSI) not available to the general population [1]. In the Indian context, insider trading is mainly regulated by the SEBI (Prohibition of Insider Trading) Regulations 2015 that seek to promote fairness, transparency and integrity in the securities market<\/p>\n","protected":false},"author":1476,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"two_page_speed":[],"_jetpack_memberships_contains_paid_content":false,"_joinchat":[],"footnotes":""},"categories":[20],"tags":[],"class_list":{"0":"post-24110","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-company-law"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts\/24110","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/users\/1476"}],"replies":[{"embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/comments?post=24110"}],"version-history":[{"count":2,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts\/24110\/revisions"}],"predecessor-version":[{"id":24170,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts\/24110\/revisions\/24170"}],"wp:attachment":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/media?parent=24110"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/categories?post=24110"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/tags?post=24110"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}