An Analysis Over The Impact Of Insider Trading In Financial Markets In India
- IJLLR Journal
- Jan 7
- 1 min read
Arshiya Banu R, LLM, Amity Law School, Amity University, Bengaluru
Jyotirmoy Banerjee, Assistant Professor, Amity Law School, Amity University, Bengaluru
ABSTRACT
Insider trading, the practice of trading securities based on material, non- public information, continues to pose significant challenges to financial market integrity and investor confidence. This unethical behavior results in unfair advantages, erodes trust within the corporate structure, and can lead to severe financial consequences. In India, the prohibition of insider trading was formalized with the enactment of the SEBI Act in 1992. Despite this, the practice remains a prevalent issue, as evidenced by the 141 insider trading investigations initiated by SEBI between 2015 and 2019, with 119 cases detected in the fiscal years 2018-19 and 2019-20—the highest recorded since SEBI’s establishment. Globally, the problem persists, with regulators like the Financial Conduct Authority (FCA) in the United Kingdom identifying suspicious trading activity in 30.3% of takeover announcements in 2023. This article critically examines the evolution of insider trading laws, key regulatory challenges, and landmark cases that have shaped the enforcement landscape. It highlights the gaps in compliance, the difficulties in imposing criminal liability, and the necessity of robust investor protection mechanisms. The study also evaluates the impact of insider trading on market stability, emphasizing the importance of transparency, effective surveillance, and stringent penalties in deterring such practices. It concludes by proposing actionable solutions to strengthen existing frameworks and minimize the adverse effects of insider trading, thereby fostering a fair and equitable securities market that upholds investor confidence and market integrity.
Keywords: Insider Trading, Non-Public Information, Securities and Exchange Board of India, Investor, Stock Market.
