MGT 534 CORPORATE GOVERNANCE

NAME: Shivani Panchal

AU1813085, SECTION :1
4th Year Integrated MBA
(Friday Activity)

SUBMITTED TO: PROF. NIMIT THAKER

DATE: 10 OCTOBER 2021
 INSIDER TRADING
1.
Insider trading is defined as a practise in which people who, as a result of their work,
have access to other non-public information that can be crucial for making investment
decisions indulge in trading of a company's securities. Every individual who is
connected is an "insider."

2. Key employees, Directors, Executives and Senior Officers are some important terms in
relation to insider training. whereas these are some of the features of insider trading
(i) Insiders are prohibited from conveying Unpublished price sensitive information
(UPSI) to others,
(ii) outsiders are prohibited from procuring UPSI, and
(iii) insiders are prohibited from trading while in possession of UPSI.
Characteristics of Insider Trading are as follows
3.
• Insider trading is prohibited by Section 195 of the Companies Act of 2013, which applies to
any director or key managerial employee of a corporation. The phrases "insider trading" and
"price-sensitive knowledge" are also defined in this section.
• No one may engage in insider trading, either directly or indirectly, according to Section
12A(d) of the Act.
• Section 15G of the Act, on the other hand, stipulates a penalty for insider trading of at least
ten lakh rupees (Rs 10,00,000) but up to twenty-five crore rupees (Rs 25,00,00,000) or three
times the profit obtained through insider trading, whichever is larger.
4.
• RAKESH JHUNJHUNWALA (APTECH COMPUTERS)
The Securities and Exchange Board of India (SEBI) has reached an agreement to settle a
'insider trading' case involving ace investor Rakesh Jhunjhunwala, his wife Rekha
Jhunjhunwala, and eight others accused of irregular activity in Aptech Computers shares.
Rakesh Jhunjhunwala and others settled the case under SEBI's consent procedure, which
allows an alleged wrongdoer to close investigations and adjudications without admitting or
admitting guilt or accusations. Rakesh Jhunjhunwala has paid a total of 18.5 crore in charges,
including roughly 6 crore in disgorgement. Rekha Jhunjhunwala, his wife, has paid 3.2 crore.
• SAURABH MUKHERJEE (FORMER CEO OF AMBIT CAPITAL)
 The former CEO of Ambit Capital, Saurabh Mukherjee, has paid a penalty cost of Rs 1.38
crore to the SEBI for settling an insider trading case. The issue involved a broker passing on
unpublished price sensitive information regarding Mannapuram Finance to clients in the
format of research reports. The former learned of the financial loss for the quarter ending in
March 2013 during his meeting with the financing company's senior executives. The
investigation discovered that the former had access to non-public data, which he then
shared with his clients in the form of research reports. In its decision, SEBI found the former
guilty of violating the code of conduct for insider trading prevention. Saurabh Mukherjee
had to pay the fine after the judgement.

• GENERAL INSURANCE CORPORATION OF INDIA

SEBI found that the state-owned insurance company General Insurance Company of India
(GIC) had broken insider trading rules and collected settlement fines of over Rs. 1.23 crores
as a result. The stock market regulator investigated and found the insurance business guilty
of failing to disclose a change in the company's shareholding. GIC was discovered to have
delayed informing SEBI regarding Axis Bank's scrips. GIC was served with a notice to settle
the matter for a penalty cost of Rs. 1.23 crores. Following that, the insurance company
agreed to pay the settlement fees.

5. The information which is just a casual routine conversation between two parties is not
considered to be insider trading. For instance, if a person attends a party where he overhears a
couple talking about their company’s cash out merger or any announcements that the company
is going to make in the near future, then even if the person who overheard the conversation
buys the stocks of that company, he won’t be charged under insider trading nor the couple from
the party will be called insiders. The information which is not price sensitive information is not
considered as insider trading.