Meaning of “Insider”
An insider is understood as a person having control over the management of affairs of the corporation and who has deep insight into the affairs of the corporate body and holding knowledge about “price sensitive information” relating to the performance of the corporate body that could have a decided impact on the movement of the price of its equity. Therefore he is at a vantage position with regards to a prospective trading in the shares of the company to the detriment of the common investors.
Taking this fact into account the Regulation prescribes several “do’s” and “don’ts” with reference to these “insiders”. The effect of the regulatory measure adopted by SEBI is to prevent the insider trading in the shares of the company to earn an unjustified benefit for himself and to the disadvantage of the bonafide common shareholders.
Insider definition as amended by SEBI vides its Notification No. LAD-NRO/GN/2008/29/44801, dated 19.11.2008 means any person who,—
(i) is or was connected with the company or is deemed to have been connected with the company and who is reasonably expected to have access to unpublished price sensitive information in respect of securities of a company, or
(ii) has received or has had access to such unpublished price sensitive information.
Insider Trading
Insider Trading generally involves the act of subscribing or buying or selling of the company’s securities, when in the possession of any unpublished price sensitive information about the company. It also involves disclosing any unpublished price sensitive information about the company to others who could subscribe or buy or sell the company’s securities. Insider Trading invokes severe civil and criminal penalties not only on the Insider but also on the company in certain circumstances under the Regulations issued in India under the Securities and Exchange Board of India (SEBI) Act, 1992.
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By
CMA Ankur Pandey
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