Beware of those "andar ki khabar" - Fallout of Insider Trading

Insider Trading explained in Indian context

While the world might be glued to the sentencing of the former Goldman Sachs director Rajat Gupta, the Indian Securities market watchdog SEBI is gearing up its systems to tackle that has been the bane (or boon depending on which side you belong to) for traders. SEBI has had a limited impact to tackle the menace of Insider Trading in India.

Insider Trading in India

Insider Trading explained

Insider Trading involves passing of price sensitive information by privileged individuals before they are out in public domain for personal benefits. It has a crippling impact on overall market sentiments and investor confidence.

What are the Indian pills to control the disease of Insider Trading?

For starters SEBI has clearly outlined the rules governing control of Insider Trading in India. The SEBI (Prohibition of Insider Trading) Regulation, 1992 has provided regulations to monitor and book offenders of insider trading. The most notable offender to have been booked for price manipulation under these laws has been Reliance Infrastructure and Reliance Natural Resources in 2011. Industry watchers are of the opinion that SEBI lacks regulatory teeth to nab widespread Insider Trading that is rumoured to exist in Indian Securities Market.

The way forward on Insider Trading

The highlight of the Rajat Gupta's prosecution has resulted in better sensitization of Indian law enforcers to create a better regulatory framework to control the malaise of insider trading. It remains to be seen how does SEBI respond to the heightened investor protection needs.

Watch out this space for more on this.