Essay On Insider Trading

2217 Words9 Pages
Chapter 1 THE CONCEPT OF INSIDER TRADING INTRODUCTION The various frauds and the scandals that take place in the corporate sector, most of them are being committed by the corporate insiders rather than the outsiders. Due to this reason, the regulators all around the world are very much serious to create the regulations and impose harsh penal penalties upon the offenders of insider trading. Being informed is certainly justified, but when such information leads to unfair gain to an individual over others then it is not justified. Exploiting asymmetry of any information is unfair and hence, it forms the basis of the offence of insider trading. When an individual or an organization makes a transaction involving the securities of a company and knowingly that, they are in possession of some confidential information not available to general public and that information is a price sensitive one i.e. it will materially affect its price if available generally, then it amounts to the offence of insider trading. The effect of the practice of insider trading is such that it erodes the confidence of the investors in the equality of the market and is opposed to the fairness of the market as well. Insider trading refers to the use of…show more content…
Then in the year 1986, Patel Committee recommended amendment in the Securities Contract (Regulation) Act, 1956 so that the Security Exchanges could be able to restrict insider trading along with other unfair transactions. Finally, on the basis of Abid Hussain Committee report in 1989, a separate statute to regulate insider trading was decided to be enacted in the form of the Securities and Exchange Board of India (Insider Trading) Regulations, 1992. An amendment in these regulations was done by the SEBI in
Open Document