13.15What is insider trading?
1What is it?
Insider trading means trading on unpublished price-sensitive information (UPSI), like unannounced results or a merger, that you got through your position or connections.
2Why does it exist?
It’s unfair to everyone else and is illegal under SEBI’s Prohibition of Insider Trading Regulations. Penalties include heavy fines, bans and prosecution.
3Stock market example
Company insiders face trading windows (they can’t trade around results) and must disclose their trades.
4Quick revision
- Trading on unpublished sensitive information.
- Illegal; heavy penalties.
- Insiders have trading windows.
5Knowledge check
Q1. What is UPSI?Show answer
Unpublished Price Sensitive Information.
Q2. Your friend at a company tells you results before they’re public, and you trade. Legal?Show answer
No, that is insider trading.
Q3. What is a trading window?Show answer
A period when insiders are not allowed to trade, typically around results.