SEBI and its Role in Prohibiting Insider Trading

To control insider trading, the Companies Act of 1956 incorporated Sections 307 and 308 (Refer to Exhibit I for Details of Sections 307 and 308 of Companies Act, 1956). During 1940-60, capital market operations were controlled by the Controller of Capital Issues – the regulatory authority under the Capital Issues (Control) Act, 1947. During the 1980s, the rapid growth in the capital market led to a huge cash flow which was followed by several malpractices and frauds being reported in the stock markets of India. People wanted to get rich quickly by finding loopholes in the system. The most prominent of these frauds was price rigging. And there was no authority to listen to the grievances of the traders and investors. This forced many traders and investors to stay away from the stock market. The Government of India (GoI) recognized the urgent need to establish a regulatory body to monitor the operations of the capital market and find solutions to the problems the market was going through...