What is Insider Trading?
Insider trading means employing unfair methods in the stock market. It pertains to misusing one’s access to price sensitive information ahead of others.
Who is an insider?
SEBI Insider Trading Regulation Act, 1992 defines the insider and price sensitive information as follows:
1. An insider connected with the company, is deemed to have been connected with the company and is reasonably expected to have access by virtue of such connection to unpublished price information, has received or has had access to unpublished price sensitive information,
Unpublished price sensitive information relates to the following areas: Financial results of the company, intended declaration of dividend, rights or bonus share offers, major expansion plans or execution of new projects, amalgamation, mergers and take overs, disposal of the whole of the undertaking, any change in policies, plans or operations of the company.
2. is a director or is deemed to be a director as defined in the Companies Act,
3. is an officer or employee of the company,
4. holds position involving a professional or business relationship with the company, reasonably be expected to have access to unpublished price sensitive information,
5. an official or member of a stock exchange,
6. a dealer in securities or an employee of such a dealer member,
7. a merchant banker, share transfer agent, registrar, debenture trustee, broker, portfolio manager, investment advisor, sub-broker, investment company or employee thereof of a trustee of mutual fund, or
8. a director on the board of an asset management company, a director or employee of a public financial institution,
9. an official or employee of a self-regulatory organization; and
10. a relative of any of the above, banker to the company.