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SEBI and its Role in Prohibiting Insider Trading |
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EXCERPTS |
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In the year 1987, Rajiv Gandhi, the then Prime Minister of India, declared in his budget speech for the financial year 1987-1988 that the GoI intended to set up a separate authority to regulate the Indian Capital Market. Finally, in April 1988, SEBI was constituted as an administrative body to function under the control of the Ministry of Finance. The aim of creating SEBI was “to protect the interests of investors in securities and to promote the development of and regulate the securities market, and deal with matters connected therewith.” ... |
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| SEBI faced various challenges in establishing and proving a case to convict the person/s accused of insider trading, due to the lack of evidence. In the Rakesh Agarwal (Rakesh) vs. SEBI case, Rakesh, the Managing Director of ABS Industries Ltd. (ABS) , was involved in negotiations with Bayer A.G (a company registered in Germany) regarding their intentions to take over ABS. Therefore, he had access to this unpublished price sensitive information. .. |
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| Even after penalties were imposed and legal action was taken, SEBI observed that, over the years, there was an increase in the number of insider trading cases being filed. In FY 2019, SEBI received the highest number of suspected cases of violation of insider trading regulations i.e. 70 (Refer to Figure I for Number of alleged cases from 2015-19). In the period 2015-19, SEBI received around 141 alleged insider trading cases but completed investigation into only half of them because in many of the cases, SAT dismissed the insider trading charge and penalty that SEBI had levied on the accused person or company... |
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| Exhibit I: Details of Sections 307 and 308 of Companies Act, 1956
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