ASHISH CHATURVEDI 61 SHWETA COELHO 62 PRIYANKA DASAUNI 63 VISHAL DOSHI 65 BHARAT DUBAL 66

INTRODUCTION
Material, non-public information
Illegal Puts others at the risk

SEBI TAKE ON INSIDER TRADING

SEBI (Prohibition of Insider Trading) Regulations, 1992
Have or has or has had access to unpublished price-sensitive

information
Any auditor, employee, promoter or their relative

EXAMPLE
Mr. A owns ABC Industries, trading at Rs 120 a share, he sells the

stock at Rs 120, the stock falls to Rs 60, Mr. A has managed to avoid a loss.
If investor in ABC Industries denied the opportunity to sell the stock

at Rs 120. And had bought the stock at Rs 120, have lost money.

FEW EXAMPLES OF INSIDERS INFORMATION

Periodical financial results Intended declaration of dividends Issue of securities by way of public/right/bonus etc Major expansion plan or execution of new project Amalgamation/merger or takeover, Disposal of whole or substantial part of undertaking, Any significant change in policies, plans or operations of the company. (The Trading Windows will be closed if any of the above quoted corporate action is to be announced. Insiders cannot deal in securities of the company during this period.)

RANBAXY CASE
RANBAXY (Solrex) INSIDER TRADING CASE

Individual : Mr. V. K. Kaul (Non- Executive Independent Director)

From January 2007 December 2008

Others involved : Mrs. Bala Kaul (Wife of V .K . Kaul) Information leak : Mr. Malvinder Mohan Singh (Former MD)
Mr. Umesh Sethi (former VP Global Finance)

MODUS OPERANDI
Trading done through solrex (a division of Ranbaxy)
Mr. V. K. Kaul bought 35,000 shares of Orchid Pharma on behalf of

his wife
Bought @ price Re.131.71 p.s. on 27th & 28th of March 2008

Sold @ Re.219.94 p.s. on 10th of April 2008

Profit made was Re.31 lacs approx

MODUS OPERANDI (contd.)

The trading was done by taking help from the 2 senior officials

who had an access to UPSI

The telephone records are the proof for contacts with senior

officials
SEBI in Jan 2011 charged 60 lacs as a fine on Mr. V.K.Kaul ( 50

lacs on him & 10 lacs on Mrs. Kaul)

SAT confirmed the insider trading case of Solrex on 9th oct 2012

to be charged as above

WOCKHARDT CASE
Individual: Rajiv B. Gandhi
Company Secretary and Chief Financial Officer Responsible for all mergers and acquisitions and was a Wockhardt

employee for over 10 years

Other individuals involved:
Amishi Gandhi - Rajivs sister

Sandhya Gandhi Rajivs wife

MODUS OPERANDI
January 21, 1999 at 1700 hours: Board meeting January 21, 1999 at 1237 hours: Sandhya Gandhi sold 1500 shares of

the company January 21, 1999 at 1442 hours: Amishi Gandhi sold 600 shares of the company January 22, 1999 at 0959 hours: Amishi Gandhi sold 1000 shares of the company January 22, 1999 at 1004 hours: Sandhya Gandhi again sold 500 shares of the company

MODUS OPERANDI (contd)

Amishi Gandhi and Sandhya Gandhi purchased 1600 and 2000 shares

of the company respectively at an average price of Rs. 306 April 22, 1999 at 1130 hours: Meeting of the board of directors of the company April 21, 1999 at 1016 hours: Amishi Gandhi sold another 2300 shares of the company at an average price of Rs. 342-355 April 22, 1999 at 1133 hours: She sold another 1200 shares at an average price of Rs. 363-369 April 23, 1999 at 1008 hours: Amishi Gandhi purchased 3500 shares of the company at an average rate of Rs. 321-329 when the price had fallen

MODUS OPERANDI (contd)

October 14, 1999 Sandhya Gandhi purchased 200 shares of the

company at an average price of Rs. 757-760 October 18, 1999 at 12 noon: Meeting of the board of directors October 18, 1999 at 1017 hours: Sandhya Gandhi purchased 1000 shares of the company

INITIAL DISCLOSURE
Disclosure by whom Any person acquiring 5% or more Director or Officer shares or voting rights

Disclose what

Number of shares voting rights held

To the company

or

Number of shares or voting rights held

To the company

Disclose to whom Disclose when

Within 4 working days of the Within 4 working days of the acquisition/receipt of intimation of acquisition/receipt of intimation of allotment allotment

Disclose how Disclosure by company the

Form A

Form B

Within 5 days of receipt to all the SE Within 5 days of receipt to all the s in prescribed format SE s in prescribed format

CONTINUAL DISCLOSURE
Disclosure by whom Any person holding more than Director or Officer 5% shares or voting rights - Number of shares or voting rights held - Any change in shareholding or voting right even if such change results in shareholding/voting rights falling below 5% - Any change since last disclosure in excess of 2% of total shareholding By the person to the company Within 4 working days of the acquisition/sale Form C Within 5 days of receipt to all the SE s in prescribed format Disclose what - Number of shares or voting rights held - Any change since last disclosure in excess of Rupees 5 lac in value or 25000 shares or 1% of total shareholding, whichever is lower.

Disclose to whom Disclose when Disclose how Disclosure by the company

By the director or officer to the company Within 4 working days of the acquisition/sale Form D Within 5 days of receipt to all the SE s in prescribed format

POWERS OF THE SEBI RELATED TO INSIDER TRADING IN BRIEF

SEBI has power to investigate the charges of Insider trading against

any person
SEBI has right to examine records, books of accounts, documents

pertaining to any company.

SEBI is empowered to record the statement of concerned person.

INSIDER ACCORDING TO SEBI

Insiders need not be the person who is directly connected to the company because of

their position or otherwise. SEBI has defined insider as a person connected to or deemed to be connected and has reasonable connection with unpublished price sensitive data of the company Directors/CEOs/Large shareholders/managers/workers Independent non-executive directors, It includes a person who is a connected person six months prior to an act of insider trading Share Transfer Agents/registrar to an issue Investment company/trustee company Subsidiary of a company and relatives of connected persons Asset management company Merchant banker/debenture trustee/ broker/sub-broker Portfolio manager/investment adviser/analysts Accountancy firms, law firms/consultants Or an employee thereof

DUTIES AND OBLIGATIONS OF COMPANY

To appoint compliance officer
Appropriate mechanism for adherence of code of conduct To abide by the Code of Corporate Disclosure practices by

SEBI To identify price sensitive information To ensure data security

PENALTIES
Penalty of 25 crs or 3 times the amount of profit out of insider

trading
Criminal prosecution Prohibit an insider from dealing in securities of the company

SHOULD INSIDER TRADING BE PERMITTED ?

According to Mr. Emeritus Henry Manne (Dean of George Mason

University School of Law)- Insider trading will drive the price of the securities near to its real value According to Professor of Law Mr. Jonathan Macey (Yale Law School)- It should be left to the company to have its own policy Majority are in opinion that it is against the interest of fair market Therefore Regulators from most of the countries have found it one of the most controversial issue but they considered it harmful for the growth of the financial market and has declared it illegal.

FEW EXAMPLES OF INSIDER TRADING CASES

Former Asia Pacific Head of Alliance Mutual Funds sold large number of shares

of Alliance which was under his management, this caused a sharp falls in the valuation of Alliance shares in the market. The person was found guilty of insider trading and banned from trading for 5 years by SEBI

Ms Chua Yang Joo, who was with medical device manufacturer Biosensors was

charged for insider trading by Monetary Authority of Singapore for trading in shares while in possession of non-public price-sensitive information. A penalty of $77,000 was charged from her loan scam. Money Matters a local debt syndication firm promoted by Rajesh Sharma has collected unpublished price sensitive information many companies from Naresh Chandra, secretary(investments) LIC and made huge profit dealing in the securities on the basis of the information. accused for leaking confidential information about the Marvell Technology Group and Nvidia to hedge funds.

Another famous case of insider trading has come up on the name of housing

A technology consultant Ms. Winifred Jiau, of Primary Global Research was

CONCLUSION
Importance of efficient markets Prevalent illegal insider trading cause loss of faith of the

investors Loopholes despite strict regulation Difficulty for Regulators

Small penalty awarded by SEBI
political connection of the corporate

Steps to curb insider trading Strong willpower and strict regulation Proper policy and effective compliance officer