What Is Insider Trading?

Insider trading involves trading in a public company's stock by someone who has non-public,
material information about that stock for any reason. Insider trading can be either illegal or legal
depending on when the insider makes the trade.

 Insider trading is the buying or selling of a publicly traded company's stock by someone
who has non-public, material information about that stock
 Material nonpublic information is any information that could substantially impact an
investor's decision to buy or sell the security that has not been made available to the
public.
 This form of insider trading is illegal and comes with stern penalties including both
potential fines and jail time.
 Insider trading can be legal as long as it conforms to the rules set forth by the SEC.

Regulation of Insider Trading in India:

 India’s Company Law was enacted in 1956, the Thomas Committee had pointed out the
lack of a special legislation to deal with the, unfair use of inside information in 1948
itself, it took a few decades to actually formulate a legislation to control insider training.
 The provisions relating to Insider Trading were incorporated under the Sections 307 and
308.
 Due to inadequate provisions of enforcement in the companies Act, 1956, the Sachar
Committee in 1979, the Patel Committee in 1986 and the Abid Hussain Committee in
1989 proposed recommendations for a separate statute regulating Insider Trading.
 The rapidly advancing Indian Securities market needed a more comprehensive legislation
to regulate the practice of Insider Trading, thus resulting in the formulation of the SEBI
Regulations in the year 1992, which were amended in the year 2002 after the
discrepancies, observed in the 1992 regulations.
 The amendment in 2002 came to be known as the SEBI (Prohibition of Insider Trading)
Regulations, 1992. The regulations of 1992 seemed to be more disciplinary in nature
while the 2002 amendment regulations on the other hand are precautionary in nature.
 SEBI issued and notified the SEBI (Prohibition of Insider Trading) Regulations, 2015 on
15th January, 2015 based on recommendations of Sodhi committee and became effective
from 15th May, 2015, by repealing the SEBI (Prohibition of Insider Trading) Regulations
1992.